August 2015: 4 Ways to Save Money While Improving Financial Security

August 1, 2015

Hello All,

I hope you are enjoying the summer! We have been and have certainly enjoyed hearing about all of the vacations, summer camps and conferences that have filled up your summer months. This past week we welcomed Norman Mangina as the newest member of the Illumination Wealth team. We are excited for you to get to know Norman in the months ahead and hope you enjoy our August newsletter where we cover several time (and money) saving opportunities including:

4 Ways to Save Money While Improving Your Financial Security
The Market Scoreboard: July 2015
Illumination’s Media Spotlight: The Best Articles & Interviews in July

4 Ways to Save Money While Improving Your Financial Security

There is something that we have to get off our chest. Over the past month we have reviewed three different clients’ home & auto insurance plans and to say our clients were not getting treated like they deserved was an understatement. In all three situations, we identified hundreds of dollars of savings and were able to secure even broader insurance coverage. In other words, more for less. Who doesn’t like that?

The stories are pretty much the same. You get a referral from your real estate agent, friend or you decide to get a quote online on your own. As we have seen with most people’s insurance programs, it’s usually set it and forget it. Can you relate? Most people don’t think about the adequacy of their coverage or the cost after obtaining their policies. They just keep paying the new premiums as the policies renew. As you will see below, it’s financially intelligent to review your policies to see if you are paying the least amount for the coverage you need.

With all new clients we review their insurance coverage for deficiencies and cost savings opportunities. Not to mention, every year thereafter we review our client’s personal insurance, including their home, auto and jewelry policies and help them shop for new coverage.

We recently reviewed a new client’s coverage and determined their liability and coverage limits were way too low and the premiums unusually high. These clients recently moved into a newly remodeled home in a nice neighborhood. In order for the insurance company to make their homeowners insurance rate competitive, they designed a policy that under insured our clients home by $105,000. Can you imagine if your house burned down, and you had come out of pocket $100,000 to rebuild it?

In any event, we suggested they increase their homeowners coverage, in addition to raising the liability limits on their cars, rental property and procure a $1 million umbrella policy. Not knowing the end result of increasing all of their coverages we shopped their policies with an independent trusted insurance advisor. Needless to say, by knowing what to look out for, our clients procured the critically important coverage while saving over $400 per year. All they had to do was sign a few pieces of paper.

When it comes to your personal insurance here are 4 Ways to Save Money While Improving Your Financial Security:

Shop your insurance coverage

Insurance rates vary by insurance provider based on their independent evaluation of your risk. Each insurer uses many factors to evaluate your risk, and they don’t all calculate it the same way. So what are you to do? The only way to address the inconsistencies in insurance rates among providers is to shop your insurance with multiple providers. Rates can vary significantly among providers, and the difference can be double the cost or more. There are many insurers out there, and it can be a time consuming process to contact them all for quotes, so many people work with an insurance agent to help them find the best coverage. But you also need to find the right agent. Is your agent a captive agent or are they an independent agent. A captive agent works for only one insurance company and only sells their products. An example of a captive agent is a State Farm agent. An independent agent does not work for a particular insurance company and can help you shop insurance rates at multiple providers. A client recently shopped for auto insurance for two automobiles, and for the same coverages, he was able to save 30% in premiums just by switching insurers. It pays to shop around.

Get all the discounts you can

You can save additional money on insurance with discounts. One of the best discounts to consider is a multi-policy discount. A multi-policy discount is a discount the insurance company offers you if you have multiple types of insurance policies with them. It only takes two types of policies (auto, home, boat, or RV) to get the discount. You will also benefit by having only one insurance company to work with for renewals and claims.

There are other discounts the insurance company may not tell you about, but you should ask about. If you graduated from college, ask about discounts for graduates of your college or university. Some insurers also offer discounts to members of professional associations. If you have a child on your insurance policy, ask about a good student discount. Make sure you let the company know about any security devices you may have installed in your home or car as there are typically discounts for those as well.

Increase your deductible

Your deductible, or how much you are responsible for before the insurance company pays out in the event of a claim, also plays a role in your premium. If you increase your deductible, the insurance company will not charge as much for premiums. So how much should you increase your deductible? We recommend a 5 year payback period. So if increasing your deductible $500 saves you at least $500 over 5 years, you should do so. You should also consider what amount you can cover out of pocket without filing a claim. If you have established an emergency fund, you can use your emergency fund for smaller claims up to the deductible amount and not have to file a claim which would likely cause your premiums to increase.

Pay your premiums upfront

When you’ve settled on an insurance policy and it’s time to pay the premium, you usually have the option to pay it upfront or pay on a monthly or quarterly basis. Usually, the insurance company charges more if you pay monthly or quarterly in the form of transaction fees and slightly higher premiums. You can avoid these unnecessary extra costs by paying the premium upfront. Remember, though, to budget for your insurance renewal premium that will be due in a few months or a year.

If reviewing your coverage and shopping it around is something that you don’t have the time for or understand exactly what you should be saying to your insurance agents, hire a financial planner that will help you manage these critical aspects of your financial life.

Market Scoreboard: July 2015

This past month was full of newsworthy headlines. China’s stock market declined 8% on one day in late July. Greece’s people voted against a bailout offer. The U.S. economy grew at 2.3% in the 2nd quarter. What does it all mean? Well, by the time the headlines reach national attention, the markets have already moved in response and limited any use you could make of such information. Let’s face it, there is a never ending flood of financial headlines that should be considered “noise.” These should never be seen as signals to alter your well laid financial life plans.

Here are the July returns of seven broad asset classes:

Click to enlarge

Despite the July headlines, the major stock markets posted slight gains for the month. The Wilshire 5000 Index (a very broad U.S. Stock market index) returned 1.55% for the month while their international counterparts rallied over 1.5% as well. Emerging market stocks sank in excess of 6% on China weakness and currency fears. For the same reasons, commodity returns were down as Oil and Gold declined significantly. Real Estate rallied while most bond funds had slight gains. The aggregate bond index increased 0.86%.

Even with the global market turmoil, it is always best to stick to your plan and use the volatility in these different asset classes to your advantage.

Sources: www.stockcharts.com. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Illumination’s Media Spotlight

Here’s our monthly compilation of interesting articles and videos designed to keep you informed and engaged in the areas of personal finance, the economy and life. We hope you enjoy this month’s edition. Please send us your thoughts on this month’s articles and suggestions for future posts.

Investing in Your Financial Life

What if Money Was No Object?

Bloomberg: Watch an Elite Financial Adviser Hack His Own Retirement

New York Times: An Emotional Balance Sheet can Guide Hard to Quantify Financial Choices

Time: Why Focus Is Essential to Building Wealth

SUCCESS: 16 Rich Habits

Business

LA Times: Women Craft Businesses on Etsy

LA Times: Many Kids on VidCon want Business Advice

Great Videos, Podcasts & TED Talks

The Tim Ferriss Show: Tara Brach on Overcoming Challenges, Fear of Missing Out (FOMO), and Mindfulness

The School of Greatness: How to be a Jedi and Master The Mind with Tom Bilyeu of Quest Nutrition