Tag:

Personal Situation

Life Insurance Audit

by Evan September 24, 2019

Life insurance is usually one of those personal finance topics that people set and forget. Similar to investment accounts, debt contracts and other monthly nut items I believe that your life insurance should be audited and reviewed.

This year’s audit is particularly meaningful to me as I lost a friend of mine to pancreatic cancer. He was 40 years old with 3 children. As much as I have been involved in the life insurance, financial planning and estate planning world for the past decade or so, this has been the first time that someone so close to me has died leaving young children. First thing I did was take a look at some my recent life insurance audits:

It was in the 2018 life insurance review I wrote,

A friend of mine was recently diagnosed with stage 4 pancreatic cancer. He has 3 children 7, 5 and 3. The 7 year old is in the same grade as my son which is how we got to know the family and the 3 year old has become good friends with my daughter. To say it is an awful situation would be an understatement. He is putting up the good fight, and I know he has done some survivorship planning as a responsible husband and father, but I am not privy to what amounts (nor should I be). If you find yourself in a similar situation, please research your options with a guaranteed life insurance policy.
This terrible situation made me want to audit my life insurance, both regard to products and amounts.

Unfortunately, he didn’t make it. The specifics of my particular situation do not matter as much as the message – LOOK AT YOUR OWN FAMILY’S SITUATION AS SOON AS POSSIBLE.

An Overview of my Life Insurance Policies

I own a variety of life insurance policies. I am not a “buy term and invest the difference” kind of person, because virtually no one actually invests the difference! If it were the case that everyone who bought cheap term insurance and invested the rest our savings rate wouldn’t trail the rest of the world.

Convertible Twenty Year Term – This policy has a current death of $850,000. Originally, this was a $1,000,000 policy before last year, but I converted some of it already (see below).
Blended Whole Life Policy – Sometime last year, I converted $150,000 of the $1,000,000 death benefit above into a blended whole life insurance policy. Instead of converting into a pure whole life I did a 50-50 Blend wherein I basically bought a $75,000 whole life policy and $75,000 of term. The term is slowly getting converted to the full whole life. Currently the policy has a death benefit of $150,052 (2018 – $150,052) and cash value of a $47 (2018 – $12).
Non-Convertible Twenty Year Term – $1,000,000. Cheapest I could find on the market knowing that it will eventually expire.
Ten Pay Whole Life Policy – This policy was started way back in 2013; it is pretty amazing to think that in 4.5 years I’ll have this completely paid up. Currently, there is a death benefit of $45,758 (2018 – $45,392) and $6,942 (2018 – $5,709) of cash value.
Pure Whole Life Policy – Plain vanilla whole life policy with a current death benefit of $110,109 (2018 – $108,179) and cash value of $7,931 (2018 – $6,509).

Not counting any supplemental plans I may have from work I have $2,156,769 of death benefit up from $2,153,623 in 2018 and $2,152,609 in 2017. Given the new home mortgage and property taxes, I think I am a bit underinsured. While I think I’d rather be converting more and more of my 20 year term, I think I am going to have to suck it up and buy some more term insurance as the amount is way important than the type.

I currently have $14,920 of accessible cash in my policies. In 2018 I had $12,230 of cash surrender value and $9,560 in 2017 .

Life Insurance Policies on The Wife’s Life

Convertible Twenty Year Term – Death Benefit of $500,000.
Tiny Whole Life Policy – I bought this policy to help out a buddy who was new to the business. He gets credit for a new policy and I get another whole life in place. It currently has a death benefit of $26,549 (2018 – $25,646) and cash value of $328 (2018 – $90).
Blended Whole Life Policy – Another blended whole life policy. It currently has a death benefit of $250,066 (2018 – $250,041) and cash value of $5,850 (2018 – $4,845).
Pure Whole Life Policy – Currently the death benefit is $123,154 (2018 – $121,599) and cash value is $3,046 (2018 – $1,914).

The Wife currently is insured for $899,769. In 2018 she had $897,286 of death benefit and $871,957 in 2017. Again, given our new home mortgage she is underinsured. I think I am going to have to pick up more term insurance for her as well.

Currently there is a cash surrender value in my wife’s name of $9,224. This is up from $6,849 in 2018 and $4,429 in 2017.

Life Insurance on My Children

I am a big proponent of life insurance on children’s lives for two reasons:

If something were to happen to either of my kids, I am not going to work for a while. Do I have enough death benefit to retire? No, of course not, but do I have enough to take off for a bit of time to find out what new normal looks like.
Each policy has a rider on it that allows the child to increase the death benefit a number of times as they get older without underwriting. If either of them were to become uninsurable for any reason, I have guaranteed them a way to protect their future spouse and my future grandchildren without breaking the bank.

The Son’s Whole Life Policy (payable to age 100) – Current death benefit of $136,911 (2018 – $136,474) with cash value of $3,026 (2018 – $2,543).
The Daughter’s Whole Life Policy (payable to age 65) – Current death benefit of $137,266 (2018 – $136,716) with cash value of $382 (2018 – $80).

Protection doesn’t really matter (hopefully it never does), but cash may be used at a future time and there is currently $3,408 of cash. In 2018 these two policies had $2,623 of cash surrender value while it was $2,070 in 2017.

Life Insurance Audit Results

	CSV	Death Benefit
Me	$14,920	$2,156,769
The Wife	$9,224	$899,769

Given that our new home’s mortgage is well into the $600,000 mark I believe we are both underinsured and will be looking into cheap term options to close the gap.

September 24, 2019 0 comment

Personal Situation

My Last Night in my Second Home

by Evan August 14, 2019

Well after a number of housing updates it is finally the night before we move out of our second home. This home has been amazing to my family for the past six and a half years. We have become part of a community I didn’t know was possible on Long Island. I tell anyone that will listen about the amazing town we live in. It is the only home that my 4 year old daughter has known and I am pretty sure it is the only home that my 8 year old son remembers (although he swears he remembers our old place, and has been known to pull out some ridiculous memories at times).

What is interesting, is that I remember writing a similar post in December 2012/January 2013 when I was out of my first home but didn’t buy this home yet. Re-reading that post, I remember the ridiculous amount of emotions I was having at the time. I wrote some brief thoughts as I sat in my parents’ house waiting to close on that new house,

I was a lot more emotional about the whole thing than I expected.

I remember how uneasy, anxious, nervous and just plain sad I was when I moved to this house. I don’t feel that way almost at all which is frankly weird but like most things in life I have a theory!

I think a lot of those emotions were based on the unknown. I was moving to a different town out of the 3 mile radius that was my bubble for my entire life. I know I can’t compare it without seeing the movie play out but I believe leaving that bubble may have been one of the best things that happened.

The Wife and I built an amazing life in this town, and this new house doesn’t change any of that. We have the same community, friends that have become family, but this time the move just provides us with a slightly upgraded home with intangibles that no matter what we did couldn’t be changed on our current home (bigger piece of property and a much quieter street). Also, and I think this is a big part of it for me, I am not selling the home. I am renting it out, and this lets me believe that no matter what I still can “visit” those memories in years and decades to come.

August 14, 2019 0 comment

Personal Situation

Thinking about Paying off Low Interesting Debt!

by Evan July 29, 2019

With the upcoming home purchase (without a home sale on the other side), I have really been giving a lot of thought to my monthly nut. An unhealthy amount. Then I came up with an idea described in excruciating detail below.

My Increased Monthly Nut

I believe that most adults should have at least an idea of what they spend a month. I have been in the back office of a wealth management firm for over 12 years, and I can’t begin to tell you how many people do not have any kind of clue as to what they spend each month. Money only has 3 places to go:

You pay taxes with it
You save/invest it
You Consume it

That is it! When you run down that exercise with a client/producer it is amazing how fast people start to realize that they consume way too much. I digress. I have been struggling with figuring out what my new normal looks like as it relates to my “monthly nut.” Since we agreed to buy our new home without selling the old home a large portion of my net worth is still tied up in the walls of the old place. This has lead to an alarmingly huge jump in my monthly nut. Specifically, my housing costs (principal, interest and taxes) are increasing from $3,100 a month to $4,600 a month! That extra $1,500 is a huge jump that has me a bit freaked out. But I have a plan…one I am not too sure about a plan nevertheless.

Next to being able to look back and remember pieces of my life that would otherwise be gone, this blog’s next best benefit to me is the ability to write out an idea and see where I land after 500 or 1,000 words.

Paying off Low Interest Debt to Clear Cash Flow

My net worth has a few liabilities that are at 0% or extremely low interest rates, and while I am paying very little interest on them they are a drain on my monthly cash flow. Specifically we have:

$440/mo going to a credit card with 0% interest. The balance is a little under $7,000. The idea was that I figured out the monthly amount that would pay it all off without any interest.
$170/mo going to The Wife’s credit card that was used for her corrective eye surgery. The balance is at about $1,500, and again is at 0% as long as I keep paying before the time on the deal runs out.
$385/mo going to student loans. The debt is at a low, 3.5% fixed for 30 years with a balance remaining of $34,500.

So my idea is that for approximately $43,000 of capital I can clear up $995/mo in ongoing costs. This is not an easy decision for me (nor should it be for anyone where $43,000 of capital isn’t just easily available), and the pros and cons basically write themselves.

On the one hand, this is low interest debt! I mean it is basically free money at this point. Why would I use capital that could be deployed elsewhere and growing over the hurdle rate of 0%, 0% and 3.5% shouldn’t be particularly difficult. Use the power of the leverage and invest that money.

On the other hand, I am freaking out at about a 50% increase in housing costs! If I were to shove this amount into our yet to be finalized loan I would literally be saving only about $200/mo I can remove 60% of the increase with just these 3 easy moves.

There is also this nagging feeling that IF a democrat takes back the white house there could be a student loan forgiveness program that I may qualify for. I don’t think a program should get off the ground, but if it does and I paid back this large of an amount to watch other people have their loans wiped I am going to be pissed, like really pissed.

Final Decision

I am sitting on a plane writing this post, and I think by the end of next week, I am going to wipe out all the credit card debt. That will clear up approximately $600 of monthly payments going out. I know that mathematically this is a bad decision but I will feel so much better the moment it is done, so that has to outweigh a bit in this case.

I am really struggling with the student loans. I can’t get my head around the idea that if the next president and congress essentially wipes out this line item and I didn’t take advantage of it I am going to be furious. This is the only reason I am not moving forward with this move. In addition it is time to audit my other fixed monthly nut costs to determine how to trim some fat.

I am struggling because if someone gave me this set of facts, asking for advice, I would probably land in a very different place.

July 29, 2019 1 comment

real estate

Another Housing Update – I am Now a Landlord!

by Evan July 8, 2019

Things have taken a very interesting turn in my world with regards to my home sale. However, prior to getting into all the numbers, I think it may be prudent to go over what has occurred in the past year or two with regard to my primary residence and then my search for the perfect rental home.

The Wife and I saw some very interesting things happening in our tiny real estate market on Long Island back in the beginning of 2018. Our first inclination was to put it on Zillow’s “Make me Move.” We didn’t get the traction or responses we thought. Side note: I don’t think the market is there yet, but realtors hear me now, this service and others like it are your future. Being a real estate agent in 2028 years is going to be the equivalent of a taxi driver in 2018, but I digress. The Wife and I decided at that point to put the hold on the sale side until we found something we loved.

It took a lot, and I mean a lot, of open houses and even a few failed negotiations to end up with a house we finally wanted to move forward with, and even after finding said house the negotiations thereof didn’t exactly go as planned (like they ever do).

Sometime between that first and second post we decided to move forward with the sale of our home. Despite having 3 different brokers tell me that the sale price of my home wasn’t going to be a problem, it was a problem. The Wife and I reduced it $20,000 before both partners at my firm said something to me, independent of each other, that really resonated with me:

Partner No. 1 – “At some point your broker becomes worthless. If you believe you can sell your home for $X without her, then save the 4%.”
Partner No. 2 – “Just put it out to the world that you’d rent the home, and make the rent a big enough cash flow positive gap versus cost that you are covering at least some of your new home’s increased cost.”

Both were absolutely correct.

To the first partner’s point, I was going to pay the broker 4% which would be somewhere in the neighborhood of $24,000 (4% of $600k). That is a shit ton of money anyway you slice it and after being on the market for 45+ days she honestly just did not do her job. Maybe it was a case of over-promising and under delivering, but it left me with very angry feelings. At some point I could sell my house for $585k instead of $600k and still net more without her ridiculous fee.

To the second partner’s point, I have talked about owning rental real estate, both on this blog and in real life conversations for a long, long, long, long time. Maybe this could be my chance if the numbers work (and they obviously do given the title of the post).

Finding a Tenant for my Long Island Home

Just to test the water I put the home on a few sites including apartment.com and Craig’s list, the emails started to flood in! Some were not a right fit at all including a mother/daughter duo that came to see the home and in broken English actually asked me, “how many people can fit in the home?” My response was “1 family, how many people are in your family?” The Wife immediately shut that down as she wasn’t comfortable doing that to our neighbors and community.

Our luck changed once we put it out to the community. We were immediately contacted by a woman that The Wife has had a few interactions with. She shared with us that she is getting divorced and needs out of her house. She has 3 kids and wants to keep them in the school district. I told her the price (numbers discussed below) and insisted on first month’s rent, last month’s rent and security thinking it may dissuade her. It did not. We gave our broker one more weekend to figure her shit out. She did not. I then had to “break up” with my broker and she was not happy, but it is what it is.

Running the Numbers on Renting my Old Primary Residence

Between mortgage, insurance, taxes and a HELOC payment I am looking at about $3,100/mo of operating costs. I am currently charging $3,500/mo providing me a little bit of a cushion which will help with the new home costs since I will still have a large part of my net worth still locked up in the walls so it can’t be put down.

In addition, and as important, I am 6.5 years into a 30 year fixed mortgage. This means every month more and more of my payment is going to principal rather than interest. Last month for example of the $2,800 I sent to my primary insurance mortgagee about $800 went to principal.

In addition, I came up with this plan that I have since offered a few of my buddies that I have talked about getting into real estate. I offered them an opportunity to buy into the equity of the home. There are a few major pros and cons with doing so that I explained in full as to avoid any confusion later. To date, I have not solidified any deals, so we’ll see if this goes anywhere. Whether it does or does not this plan has way too much steam behind it for anything to change at this point (nor do I really want it to).

Running the Numbers on the New Home

Originally, I shared my plan,

$485,000 home with an original $385,000 mortgage at 3.375% for 30 years (fixed);

Taxes of about $12,500

HELOC has about $100 of interest owed monthly

All in I am looking at about $3,100 a month for housing. The way I figured it is if I found a home for about $700,000 and I sold my house for $600,000 (net of broker’s fees) my life wouldn’t change all that much!

Current house, verbal accepted offer is at $685,000

I currently have $240,000 of equity in my home ($600,000 minus $330,000 left on the mortgage and $30,000 for my HELOC).

If I put $200,000 as a down payment and I get a 4% 30 yr fixed I am looking at a payment of $2,400/mo (assuming $40,000 went to waste, taxes, attorney’s fees, and some upgrades).

My Taxes are about $15,000 (up from $12,500)

So my monthly nut changes from $3,100 (P&I and Taxes + HELOC interest) a month to $3,650

Well, as the saying goes, man plans and God laughs. As I sit here today, I have put 5% down from my HELOC on the new home, and I can’t come up with anywhere near $200,000 down as the equity is still tied up in the rental. Right now I am getting approved for only 10% down which is obviously way less than the 30%+ I had planned. Notwithstanding, I think it may be premature to share the home numbers because I am not exactly sure what, if anything, I am going to liquidate to bring up my down payment beyond 10%. When I get my final numbers I’ll share them, but for purposes of an example:

$685,000 house with 10% down gets us to about a $615,000 mortgage
I have been approved at 3.875% which gives me a P&I cost of about $2,800
Add in taxes of $15k/12 ($1,260) – and I am at about $4k!
Now we add in PMI, Homeowner’s Insurance, and I am looking at about $4,400
Minus the $400 or so I’ll receive on the other property and I am at $4,000 (vs $3,650 originally estimated).

Not terrible, since I’d be building equity paid by someone else. Again, this could all change by the end of the month depending if I plan on putting more down to get me closer to my original estimates.

Phew! To say it has been a stressful past 30 days or so would be an understatement!

July 8, 2019 0 comment

Personal Situation

Half Year Update – Goals and Objectives for 2019

by Evan June 19, 2019

It is shocking to think about being half way done with 2019! I usually don’t give much thought to a half year update, but with the craziness that has been happening with regard to buying a new home and selling our current home, I thought it may be a good idea to take a step back and re-read my 2019 goals and objectives post. Maybe see if I can get realigned despite the balls I am currently trying to juggle.

My overarching goal for 2019 was/is to get back to the basics! It is with that lens that I take a look at the specific goals, objectives and action items.

Professional Life 2019 Goals

This is broken down into two parts: my career and my law practice.

My Career

So I have two actionable goals I am going to work on:

Create a Quarterly Sales Tool/Idea for the financial planners in my office. This is already in the works with the first one to be approved next week. I already have 2 more ideas, and then I just need one last one for Q42019.
Meet with planners that I just don’t know to see how I can help their practice. My office currently has over 100 planners. If I interact regularly with 25 of them that would be a lot. If I could bump those numbers up even a tiny bit I could effect real change in the bottom line of the company.

I have been doing both of these projects! Off to a great start.

My Law Practice

My goal is to follow up on known opportunities.

Half way through 2019 and I don’t think I have been following up as much as I could be. I have continued to be too passive.

Blogging World

I need to seek out like minded bloggers and discuss what is on their mind. I have not been active the in the PF blogging world in quite some time. My 2019 goal would be to comment more on other sites.
Continue to work through old posts to make sure they are optimized for SEO purposes (well, at least to the best of my abilities).

I have absolutely failed on the first goal but have worked on the second. I think for the second half of the year I need to get some outside help on item number two.

Online Income World

In addition to this personal finance blog, I own a bunch of other sites that I don’t discuss often here. After speaking with my business partner we decided our joint goal for 2019 was to expand our mini-business. Once a quarter, at the end of each quarter we are going to contact dying/dead personal finance blogs and see if we can purchase them (buy low).

Completely hit that for quarter one picking up what may be a great site, however, it has fallen off in quarter number 2.

Financial Goals

The first has to do with paying down some long term debt. I have reasonably sized student loans and an outstanding HELOC, and while the interest rates aren’t particularly high I would like the cash flow back (not enough to liquidate out of the market and pay them off, but enough to make it my first goal for 2019).

I was making a fantastic dent, until we finally found a house we wanted to buy! As anyone who has bought and sold a home in the past, I doubt I’ll be able to actually put a dent in long term debt by 2020.

The second goal would be to continue/build on two asset classes I haven’t given much attention. The first are my whole life policies. I’d like to continue to proactively build this non-correlated asset, and I think the easiest way for 2019 would be to make a concerted effort to convert some of my blended policies. Additionally, I would like to continue my physical gold purchases.

Again, I was doing well, until we found the house!

The third goal is to get back to the basics with my dividend investment portfolio. Despite being one of the smallest parts of my financial world, it is easily my favorite. Last year, I made my $500 to $750/mo investments and I’d like to continue to do so in 2019. The difference between 2018 and 2019 I want to reduce the risk I have been taking with selling naked puts. I think if/when I am able to roll out of the positions I am holding because of being assigned shares (as of this post $BUD and $LB) my plan is to only sell naked puts in companies that pass a similar screen that I use for my dividend purchases. This way I know that if I am assigned at least it’ll be at a good price (theoretically ). That being said, I am done selling naked puts until I am out of the positions I am in today.

Absolute win here.

The fourth goal would be to keep myself open to real estate opportunities. I have talked about becoming a landlord for 7 of the 10 years of owning this site, and I really thought 2018 was going to be it (until it wasn’t), but I don’t want to just ignore that asset class.

I have not been really pursuing anything because of the house (wow is this getting old lol).

The fifth goal is really getting back to the basics – CHECK ACCOUNTS MORE OFTEN. Back in the beginning of this blog I would sign into all credit cards and bank accounts daily (if not more to the annoyance of The Wife), well as evidenced above, that just doesn’t happen anymore and it needs to!

I am meeting this goal so far.

Personal Life

With regard to general health I have two goals. The first to participate in more workouts that I know I am going to suck at, and those, are often those that have anything to do with high reps/high cardio. The second is to work on my flexibility/mobility. I am pretty sure it is byproduct of getting older, although I was never particularly flexible, but I find myself getting injured more due to bad form based on shitty mobility. This needs to be fixed. I am thinking once a week some type of intentional mobility/yoga routine should help.

While I have been pushing WODs that I know I’ll be terrible at, I have had zero drive to work on the flexibility part of it. I am thinking about signing up for an online service which would provide me with the guidance I absolutely need when it comes to the topic.

Last, and absolutely the most important thing, is time with my family. I don’t have any goals except to continue to be as involved in my kids life as much as I can which is way more than most I know (see above re: job). If I had to give myself a specific goal it would be to make sure they continue working on their sign language (my brother’s deaf so their eventual fluency is important to me).

Sign Language is a go, and I even turned down an amazing opportunity that may have taken time away from my kids.

Overall

The house buying has absolutely thrown me a curve ball when it comes to my annual goals. Notwithstanding, over the course of my life maybe 2019 becomes a bust in terms of a one shot goals and objectives post, I think overall it is the right move for my family (but only time will tell!).

June 19, 2019 0 comment