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Now is the Time to Get Life Insurance

COVID-19 has changed our world dramatically over the past few weeks, altering lifestyles and sparking many to take action. People are quickly buying toilet paper, soap, food—even life insurance. The latter, at least, is a great idea. With only 57% of Americans owning life insurance in 2019, many families should be getting covered as soon as possible.

In normal circumstances, people tend to underestimate risk and often fail to take measures that could improve their lives five, ten, or thirty years down the road.  Planning for the future is essentially having empathy for your future self, but it can be hard to keep your future self in mind when the needs of the day seem so much more urgent. Making that future seem real and important can be a challenge. Studies have shown that when people are confronted with an image of their older selves and asked to make decisions shortly afterward, the people will generally make safer, wiser, and more conservative choices in the present.

A global crisis is a similar window to the future. Coronavirus has given us a sense of urgency and exposed the need for good planning. Life insurance prepares you for the worst-case scenario, but it can also give you options for protecting your wealth and enjoying benefits while you're alive. It's not too late to put that plan in place to protect your family and their future.

Now is the time to get life insurance

Take Advantage of All Life Insurance Has to Offer

The important thing is to take action. The best insurance is one that’s in place when you need it. You can start the process of getting covered today, and the earlier you get it, the cheaper it is. Many insurance companies are doing their part in social distancing by using virtual systems to get people the coverage they need. Most people think of term insurance with a simple death benefit when they’re looking for coverage — 10-, 20- or 30-year plans with death benefits that will help your family should you die — but life insurance comes in many forms, including policies that build cash value, provide living benefits, and provide for retirement.

For anyone worried about their savings with the recent market volatility, now’s also a good time to buy an indexed policy. These products use an indexing method to credit interest to a policy so even if the market’s rate of return goes negative, you will not lose the interest credited to your policy.

These policies can include Accelerated Benefit Riders, also known as living benefits, which allow you to access all or part of your death benefit while you’re still alive. These benefits can be used if you have a qualifying terminal, chronic or critical illness. While simply getting sick doesn’t qualify, if an infectious disease like COVID-19 turns into a critical or chronic illness, is determined to be terminal, or if you are unable to perform what are called Activities of Daily Living, you may be able to access part of your death benefit early. Receiving this money through life insurance means that you can use it for anything from medical expenses, in-home care and household bills, paying for a wedding, a home for your family or covering childcare costs.

If you’re looking for tax advantages and protection against market volatility, indexed policies make sense in the long term. In times of emergency, you can borrow against the accumulated cash value when you need it — if your place of work temporarily closes, for example, or you want to strengthen your emergency fund. Upon retirement, you can access your cash value through tax-free policy loans. When choosing the right policy, remember:

  • Use indexed policies if you want to take advantage of compound interest, tax benefits and market protection.
  • Prioritize living benefits if you want to be able to cover costly medical treatment, in-home care and maintain your lifestyle in the event of a chronic, terminal, or critical illness or disability.  
  • If your main concern is taking care of loved ones in the event of your premature death, and you only expect to need the coverage for a fixed period-of-time, a term policy might be a good place to start.
Take action today

It’s Important to Act Now

The benefits of life insurance have never been clearer—take the urgency of this global event as initiative to get covered. The importance of life insurance is clear. Now is the time to protect your family, safeguard your wealth, and provide for the future. Get covered as soon as possible to give yourself financial security and peace of mind.

Industry Insights

With market volatility and growing concerns about the COVID-19 pandemic, people aren’t just hoarding toilet paper and hand sanitizer, they are also buying life insurance in record numbers. The need for life insurance has suddenly become clear to Americans and the insurance industry is here to help. Here are a few updates on the insurance industry during this economic climate.

1. Covid-19 Stressing Insurance Industry

Market volatility combined with the prospect of rising death claims puts pressure on insurance companies. While some are turning to new insurers that offer online-only applications, point and click solutions may not be the best solution for your family. Make sure that the company has a track record of stability and has been able to weather storms in the past.

2. Trust is Crucial with your Insurer and your Agent

It’s more important than ever to evaluate an insurance carrier and make sure they have a track record of paying their claims. Fitch is developing a rating system to assess the resilience of insurers to this pandemic. At FFS, we vet our insurance carriers not only for their service to our agents and timeliness in processing applications, but for their claims records and their Comdex ratings as well. Many of our insurers have been in business for over 100 years and they aren’t going anywhere.

3. Virtual Applications

While new online-only insurance platforms have become increasingly popular, they aren’t the only virtual option in the age of social distancing. While those solutions are simple, they offer limited options and can’t guide you to the best products to secure your family, your wealth and your future goals. With shelter-in-place orders increasing around the US, insurers have put new guidelines in place to enable virtual applications, offering clients the possibility of securing a policy even as they shelter at home. Our agents can walk you through the process of getting the best policy for your situation at this time.

The great thing is there hasn’t been a price hike from the increased demand and getting life insurance is as easy as it’s ever been. If you’re an FFS agent and would like details about updated policies and services from your carriers in light of COVID-19, access our ABO article here.

Now is the Time to Promote the Power of Indexing

In these times of market volatility, your clients should know how fixed indexed insurance products can protect the cash value in their policies during market downturns. Indexed insurance products, like certain Indexed Universal Life insurance policies (IULs), do not directly participate in any stock or equity investments—instead, they use an indexing method to credit interest on a policy so that if the rate of return is negative, their interest rate goes no lower than zero. At a time when Americans have seen the market take a dramatic dip since last year’s gains, indexing makes more sense than ever before.

The 0% floor on fixed indexed insurance products means shorter recovery times after financial crises and more years of positive interest in total.

For example, if you put $100,000 of your money in the stock market in 1998, you would have lost almost 30% of it by 2002. If you had purchased an IUL policy and put $100,000 in cash value in that policy, you would have gained 8% in 1999 and wouldn’t have lost any of it during the 2000, 2001, and 2002 down years. Even with market gains from 2003-2007, your stock investment wouldn’t catch up to the cash value of an IUL. After 20 years, your IUL cash value will have grown to $248,636 in 2018, while your stock investment would still be behind at $203,912. * 

Power of Indexing Graph

With indexing, zero is your hero. When the market takes a dip, your interest stays safe at zero, ready to leap back to positive rates at the first sign of recovery.

There’s a chance your client doesn’t know about the benefits of indexing, and the recent market downturn is your best chance to promote the benefits of indexed products. IULs are even bigger protection at this time, without any of the risks of a market downturn. No matter what, indexing is a win in all market conditions—use this to your advantage in the coming weeks! Now is the time for your client to see the power of indexing.

For FFS Agents, learn more about sharing indexing tips with your clients in our ABO article.

*Past performance is not an indication of future results. This hypothetical example shows the growth of $100,000 invested in 1998 with an indexed strategy as compared to the returns of the S&P 500.  Index Strategy assumes an annual point to point with an 8% cap. S&P 500 returns provided by Morningstar and dollar amounts calculated by FFS. Results may vary. FFS does not offer investment advice.

How Time Tracking Will Make You a Better Entrepreneur

We may think it only applies to freelancers and hourly employees, but time tracking for entrepreneurs is also essential. Our time is our most valuable commodity, and the more successful you get, the scarcer it becomes. Ideally, everything you do should get you closer to the life you want to be living. We all know that time is money, so time tracking is as important for your financial security as budgeting. After all, what is time tracking but simply budgeting your hours?

To begin, organize how you spend your time into categories like “family,” “meetings,” “travel,” and “internet.” Start logging how much time you’re spending on each category. Whether you want to track every minute or just portions of the day for each task, it matters less how in-depth you track your time and more that you do it consistently. You can easily do this with a pencil and paper, in a spreadsheet, or using one of many time tracking apps available today. Here are three apps best suited for entrepreneurs:

1. Toggl

A helpful all-around time tracker that’s also free, Toggl is probably the best starter software for anyone who wants to start logging the hours of their day. It’s simple, easy-to-navigate, and it has an app available for pretty much any device.

2. HourStack

HourStack is interesting because it represents time differently from most other apps. The hours you work appear as blocks in the app, as if they were appointments on a calendar, putting an emphasis on setting goals for your times before you even start working. It shows time in blocks as if the time it takes you to work on a task were an event on your calendar. The app will then send you alerts to help you keep to your planned schedule. It’s not free like Toggl, but it is only $7 per month—less than a streaming subscription, and one that can help make you money in return.

1. Timeular

Much different than other time trackers, Timeular has a physical controller to help you log your time instead of having to wade through messy interfaces just to start a timer. It uses an eight-sided Bluetooth device that you turn to represent which task you’re currently working on, tracking the time until you flip it to a new side and start a new task. While it’s a pricier first-time payment, it can be a creative and effective way to form time tracking habits and stick to them in the long term.

Time tracking is as important for your financial security as budgeting.

Invest Your Time Toward the Best Return

Dedicate yourself to time tracking for a week using your app of preference. When you’re finished, look back on your week and see if you notice any patterns. How much time are you spending on email, in meetings, on your phone? How many hours are spent traveling? Then, determine which tasks are making the most of every hour of your time, and repeat the habits that get you the best return on your hourly investment. For example, three hours with a client ending in a sale brings you a much better hourly rate than other time-eating tasks like checking social media.

As an entrepreneur, you should be eliminating tiny routines that cost you more time than they’re worth. Are you writing the same email over and over? Save it as a pre-written template to spare you from spending time writing the same thing every other day. This will save you more money in the long run—focusing on your time is focusing on your money.

Find the tasks that only you can do and consider outsourcing the rest. It might make sense for you to hire a cleaning service for your home, freeing up your time to build your business. Luckily, FFS already supports entrepreneurs by outsourcing most of the administrative work to our Home Office. By using the FFS Business Building System, you’re already optimizing your time.

Eliminate routines that cost you more time than they're worth.

Time Tracking Can Change Your Brain

By time tracking, you can actually increase the dopamine levels in your brain. Dopamine is a type of chemical called a neurotransmitter that is released by the brain to help you feel rewarded for things that you do. Originally thought to be associated solely with pleasure, a study by Vanderbilt scientists analyzing its levels in “go-getters” versus “slackers” showed that the go-getters have more dopamine, making it more closely associated with motivation and cost/benefit analysis than pleasure alone.

So how does time tracking increase your dopamine? “It’s possible to manipulate your dopamine levels by setting small goals and then accomplishing them,” according to Psychology Today. In other words, an entrepreneur who writes down S.M.A.R.T.E.R. goals *, tracks their time, and makes incremental daily progress towards these goals would be raising their dopamine levels, increasing their motivation, solidifying good habits, and feeling better all around!

Read our other articles in the Focus on Your Money series to get tips on saving,

What is My Credit Score and How Do I Improve It?

Everybody has a credit score, but many people still don’t understand exactly what it is and how it affects them, especially if they were never taught about managing finances growing up. Through our LiSA Initiative, the following Focus on YOUR Money webinar*  tips will show you how to improve your credit score, as well as how it is calculated.

Simply put, credit is a way to gauge a person’s trustworthiness with regard to paying back the money that they borrow. If your friend asked you for $150 to pay for a new pair of shoes, you may ask yourself: how likely is it that he’ll pay me back? You might look to how much money he owes and how timely he has been at paying those loans back in the past. This is very similar to the risk assessment that credit card and mortgage companies do on you in the form of credit reports and credit scores.

Some financial advice columnists have recently become adamant about paying cash for everything, even your car, and your home. We don’t adhere to that philosophy; after all, if you’re using cash for everything, you’re not impacting your credit at all, and there are ways you can improve your score with every purchase you make. If done correctly, using credit can be a very positive and powerful thing.

The Difference Between Your Credit Report and Credit Score

Though related, your credit report and your credit score are actually two separate things. A credit report is a document that tells the history of your financial life. There are three major credit bureaus that collect your personal information (name, address, social security number) and financial data (loans, collections, bankruptcies, and number of accounts) and compile it all into your credit report.

The activity on your credit report is then used to derive your credit score, which is a number—usually between 300 and 850—that acts as a sort of “grade” that represents your creditworthiness. The higher your score, the lower the credit risk is to potential lenders, and vice versa.

You’re entitled to a free credit report every year through AnnualCreditReport.com. Take advantage of this by making sure you check your score every year. An easy way to remember to check your score might be to always do it during your birthday month. You can also have a service like Credit Karma check your credit score multiple times a year and report it back to you. Regardless of how you check your score, it’s important that you do so. You have to know your numbers to change your numbers, after all.

Credit report v. credit history

How is Your Credit Score Calculated?

Your credit score is made up of five aspects of your finances in the following proportions:

Payment History – 35%

The largest portion of your credit score is based on how timely you are in making payments on your loans. Late payments can stay on your credit report for up to 7 years, so the most important action you can take to keep up your score is to always pay on time.

Credit Usage – 30%

Credit bureaus will keep track of the amount of your available credit you are currently using. The more you’re using, the lower your score will be, which is why your credit utilization should always be less than 30% (e.g., if you have a $10,000 credit limit on your cards, you never want to be owing more than $3,000 in credit).

Average Age of Credit Accounts – 15%

The longer your accounts have been open, the higher your score. This shows how long you’ve been responsibly managing your finances. This also means you shouldn’t close any of your accounts—keep them open to improve the average age of your overall credit.

Account Types/Credit Mix – 10%

A diverse variety of open accounts will prove to lenders that you responsibly manage multiple forms of debt. For example, having ten credit cards will look less reliable than if you were managing a mortgage, car payment, student loans, and two credit cards all at once.

New Credit/Inquiries – 10%

There are two types of credit inquiries: hard inquiries and soft inquiries. Avoid the hard inquiries—these are the ones that affect your score, sometimes by up to five points. Hard inquiries are any applications for new loans, cards, or other credit lines. Soft inquiries are credit checks made by your landlords or by your employer when applying for things like apartments and jobs. Also, remember that you never get penalized for checking your own score.

Credit Score Pie Chart

Who is Calculating Your Score?

Your credit score is calculated by each of three major credit recording bureaus: Experian, TransUnion, and Equifax. Your score may differ between each of these three bureaus because each has its own calculation model. Models are specific methods of statistical analysis used by bureaus to evaluate your worthiness to receive credit. The two major credit-scoring models are FICO (or Fair Isaac Corporation) and VantageScore.

FICO scores are the most common credit score model. The FICO score is used in over 90% of U.S. lending decisions and has been an industry standard for over 25 years. You don’t need a large income to have a high FICO score,

How to Have More Money with the Beauty of Budgeting

When you practice budgeting, you get to be in charge of exactly where your money goes. Sometimes, we can forget the true value of every dollar—that each one was earned with a specific amount of our time. When we see our paycheck come in, we feel flush with opportunity and we can lose sight of all that time we worked to earn it. Remind yourself how much work went into each dollar. Do you want to waste precious time by spending those dollars wherever your impulses take them?

This is just one of many important reasons to keep a budget. Here are a few others:

  • It lets you keep your eyes on the prize.
  • It ensures you don’t spend money you don’t have.
  • It leads to a happier retirement.
  • It helps you prepare for emergencies.
  • It sheds light on bad spending habits.
  • It’s better than counting sheep at night.

As we learned in the last Focus on Your Money webinar, we have to know the full scope of our financial situation in order to change it. Hope is simply not a strategy. You’ll have to take a more realistic look at your money before you can gain control over it. Luckily, we’re here to help.

Essential Steps to Budgeting

It may seem overwhelming at first, but by following the steps below, you’ll see that budgeting is actually quite simple—it’s just a habit that you need to form. Before you begin, set a financial goal to look forward to, like a dream home, a place to retire, or an exciting vacation in Europe. These goals will help you stay focused and make budgeting a little easier.

Know your income

The money you take home will become your budgeting baseline. The catch? You can’t build your budget on your salary alone—you’ll have to build it on your net income. Deduct your income tax and set it in your savings account before you pay yourself. Then, you can use the amount that’s left over to start your budget.

Determine your basic expenses

Count up the bills that have fixed payment amounts, such as your mortgage, your car, your insurance, or your student loans. This is also a good time to set up your emergency fund—pick a number to save monthly and factor that into this category.

Determine your variable expenses

Variable expenses are those that will change from month-to-month. These are your phone bill, your groceries, meals at restaurants, and entertainment—all things you have control over.

Prioritize

Now that you know your expenses, determine what’s really important to you. We all tend to think we won’t be able to live without the latest iPhone, but gadgets like this fall in the “Like to Have” column instead of the “Necessity” column. Be ready to make tough choices: do you really need unlimited texting? Do you really need 400 channels? You’ll have to take an unsparing look at your lifestyle to figure out what’s truly necessary and what is a luxury.

Follow your spending and review it monthly

Keep an eye on your spending—especially credit cards—and watch out for small things that quickly add up. It’s easy to cave on these minor expenses from day-to-day, so stay diligent!

Keep track

Find the best way to keep track of your expenses and income. You can use pen and paper or your favorite mobile app if you prefer, but luckily, Maria Riofrio of the LiSA Initiative has made a budgeting spreadsheet that will do most of the heavy lifting for you.

FFS Monthly Budget Tracker

Customized just for you, this spreadsheet is built with specific formulas that will automatically do all the math your budget needs. To begin, put your projected income and expenses into the left-most column. This will anticipate every dollar coming in and out of your budget each month. You’ll find your fixed expenses are coded in green, the flexible expenses are blue, and the intermittent expenses are represented by yellow.

After you’ve projected your expenses for the month, you can start tracking what you’re making week-to-week and stay on track by adjusting accordingly. Place your income in the top row (remember to save your taxes first and only use net income), and the sum total will automatically populate in the upper right-hand corner of the sheet. Your weekly expenses will also populate just below your total income as you go along. The difference between the two will then be calculated to show you the money you have left as the month goes on.

Start budgeting today with our LiSA Budgeting Sheet.

The Ten Best Ways to Save Money

Soon, you’ll be able to see which habits you need to change to have more money every month. The best way to positively affect your budget is to lower your expenses and increase your income. For this, an irregular income can actually be a good thing—when you need more income, you can simply go out and do more business.

If you have a normal 9-to-5, you’ll have to focus more on cutting down your expenses, as there’s not much you can do to raise your income outside of getting a promotion or a new job. Here are the best ways to cut your expenses and save money:

1. Eliminate debt

Interest and annual fees

You Have to Know Your Numbers to Change Your Numbers

The easiest way to put your financial life in order is to start budgeting, yet most people are still resistant to it. In fact, only 4 in 10 American adults would be able to cover a $1,000 emergency using their savings. Not only is financial security good in and of itself but getting your finances under control can also lead to better sleep at night, sturdier romances, and greater overall happiness.

Where should you start? We’ll show you, but first, there are two truths that you must address to get in the right mindset for financial health. First is understanding that, when it comes to your money, you are the one in the driver’s seat. The bad news is that no one is coming to save you—this is all on you. The good news? Budgeting is not that hard, as long as you dedicate yourself and commit to change.

The second truth is the importance of delaying gratification. Humans were designed to move toward pleasure and away from pain, even if it costs us more pain down the line. This instinct toward pleasure is called instant gratification—evidence of its existence can be found in the Stanford Marshmallow Experiment of 1972. In the study by Dr. Walter Mischel, a group of children were each given one marshmallow on a plate and told that it was theirs to eat. Then they were told that if they waited a certain amount of time before eating it, they could have another marshmallow as well and get to eat them both.

Plenty of children ate the first marshmallow instead of waiting for the other. In follow-up studies, children who waited for the second marshmallow were found to lead better lives overall—they had better SAT scores, lower amounts of substance abuse, better responses to stress, more educational achievements, and more success in relationships. These children were practicing delayed gratification, and their lives were better for it.

Luckily, your willpower can be strengthened like a muscle. It is never set in stone. “The ability to delay gratification for the sake of future consequences is an acquirable cognitive skill,” according to Dr. Mischel. We budget to reverse our human conditioning—getting the pain out of the way early and enhancing our reward later in life.

Identifying Your Needs and Wants

To budget properly, you must first learn the difference between the things you want and the things you need. Wants are the things that give you pleasure, such as a beach home, the latest fashions or a nicer car, while needs are all the things you have to buy to survive, including food, shelter, basic clothing and transportation.

Before making any purchase, determine whether you’re satisfying a want or a need and whether it will bring you closer to your financial goals or farther away. Cover your needs first, and then, with the money you have left, you can move toward your wants. Don’t be fooled, though! Think carefully—sometimes something that looks like a need can actually be a want in disguise.

How to Start Budgeting with an Irregular Income

1. TRACK YOUR EXPENSES

This helps create financial awareness—if you don’t know where your money is going, how will you know which habits to change? To make your money work for you, you have to make sure you aren’t wasting it. For the next two weeks, keep track of every dollar that you spend, and write it down using our downloadable Expense Tracker.

2. KNOW YOUR BASELINE

The following expenses make up your baseline:

  • Groceries – include the lowest food cost that is reasonable.
  • Housing and Utilities ­– mortgage or rent, utilities, insurance, taxes.
  • Medical costs – copays, cost of medicines.
  • Transportation – car payment, gas, maintenance, insurance.
  • Miscellaneous – expenses you were not anticipating.

With an unpredictable income, you must work “backward” by starting with the money you’re spending and figuring how much of that you really need. Knowing your baseline will give you that number.

3. SEPARATE YOUR BANK ACCOUNTS

Keeping your money in different bank accounts ensures that you know the specific purpose for every dollar you have. You should have the following bank accounts, at the least:

  • Business checking account – this is where your commissions will be deposited.
  • Personal checking account – pay yourself with every commission by transferring money from your business account to your personal checking account.
  • Savings account – this is for personal goals, long-term savings, and your emergency fund.
  • Tax savings account – this is for the money you owe the IRS. Keeping this money separate is essential to keeping track of tax payments.

Start by doing some research in your hometown to find out which banks have fewer fees and more advantages and go from there.

These tips will help you build a foundation to start budgeting. Use this week to track your expenses and get an idea of what your baseline looks like; in the meantime, set up your bank accounts. Next week, we’ll provide you with our budgeting template, available for download during our next webinar * and in the accompanying blog post.

Until then, remember that you’re the one who has to take control. Practice delaying gratification, keep track of every dollar and identify your wants and needs. Recruit a “budget buddy” to help hold you accountable, and don’t be afraid to ask your family for support. Remember: keep it simple! There are no more excuses—if you start budgeting, even you can have financial security and peace of mind.