Something for Nothing: 3 Investment Traps

“Everyone loves something for nothing… even if it costs everything.”
-Stephen King

dealer holding something on palms of his hands“When we try to get something for nothing (or next to nothing), we often end up with… NOTHING!” said Partners for Prosperity’s Kim Butler  on this week’s Guide to Financial Peace Radio show.  Everybody loves a deal, but it’s not such a deal when we sabotage ourselves with failed strategies.

We see the desire to get “something for nothing” in the gambling halls and lotteries. We see it with those who try crash diets and end up in worse shape than before. And we see it in the financial rabbits that people chase into holes that become difficult to dig their way out of, often led by media and advertisements that perpetuate “easy money” myths.

Have you fallen for a Something for Nothing myth? Here are some of the most common traps that snare investors and entrepreneurs:

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Whole Life Vs. Indexed Universal Life: What Insurance Agents and Financial Advisors Really Think

“Believe (me), it’s not fun try­ing to explain to a client why his cash value went down and what are those high fees about.”
– Agent/Advisor discussing Whole Life vs. Indexed Universal Life with a colleague

whole-life-vs-universal-lifeHave you ever wondered if a financial professional was selling you what is really best for you? Perhaps we all have at one time or another. In this post, we peel back the advice that agents and advisors give, not just to their clients, but to their colleagues about permanent life insurance, namely, whole life vs. universal life.

Whole life insurance has been around since before the depression, and has helped policy owners through good times and bad like an old reliable workhorse. In more recent decades, however, some consumers have demanded policies that might resemble a show horse more than a trusty mare. The result has been Universal Life, which has promised – if not always delivered – greater flexibility and faster growth of cash value. (See last week’s post for more about the differences between Universal Life and Whole Life.)

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Should You Borrow Against Your Cash Value or Withdraw It?

“A penny here, and a dollar there, placed at interest, goes on accumulating, and in this way the desired result is attained.”
-P.T. Barnum

The Whole Life Insurance Dilemma: Taking Your Cash vs. Taking a Policy Loan

withdraw-vs-borrow-against-whole-life-cash-valueNeed a chunk of change? Perhaps it’s an emergency, perhaps it’s an business opportunity, or it may simply be a periodic major purchase such as a new car. Either way, it’s bound to happen – you’ve got a need for cash, and you have to decide whether to get the cash from a credit card, a retirement account, a home equity line of credit, or somewhere else.

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How Much Life Insurance Do You Need? Get More Insurance for Less by Combining Policies

“A life insurance agent said to a would-be client: “Don’t let me frighten you into a hasty decision. Sleep on it tonight. If you wake in the morning, give me a call then and let me know.”
– anonymous

How Much Life Insurance Do You Need? Get More Insurance for a Less by Combining PoliciesHow much life insurance do you need, exactly? How do you determine how much is enough? Are there rules of thumb? Are there limits to how much you can get? And if you are using a whole life policy to store cash, is it really providing you the death benefit your family should have?

First of all, we’d like to clarify that no one “needs” life insurance. It’s not a staple of life like food, water, and shelter, and we are definitely not in the business of applying pressure or guilt to buy life insurance (or more of it).

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Protecting Assets from Lawsuits and Judgments: Are You a Target? (part one)

“There are roughly 300 million Americans. Of these, over 1 million are lawyers. No other nation on earth has, or wants, this many lawyers. These lawyers work tirelessly encouraging and assisting Americans to sue one another.”
-Don Miller in op-ed to The Telegraph, “We Are the World’s Most Litigious Society,”

Protecting Assets from Lawsuits and Judgments: Are You a Target? You might be a careful driver with good insurance. You might treat people fairly and with respect and enjoy excellent relationships. You might avoid conflicts and risky behavior like the plague, and you might not even own your own business.

It doesn’t matter. You can still be sued for everything you’ve got.

There is always a risk of being sued. Beyond the cliché of the car accident lawsuit (a real possibility that could happen to anyone), consider these other risks:

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Are You Insurance Poor? The Truth about Insurance Deductibles and Premiums

Are You Insurance Poor? The Truth about Insurance Deductibles and Premiums The Act of God designation on all insurance policies… means, roughly, that you cannot be insured for the accidents that are most likely to happen to you.”
– Alan Coren, English humorist

“Insurance Poor” is a term for being over-insured. In other words, you’re so poor from making the payments to protect yourself from the “what ifs” that you don’t have money for much else!

It can be a cyclical problem. Perhaps you don’t have liquid savings to pay higher deductibles, so you pay higher premiums to get lower deductibles, thus perpetuating a lack of cash flow and savings. Or, perhaps you’re “saving too much,” but always in a 401k, an IRA, or an education account there the money is tied up for a specific purpose. The cycle continues; you never feel you can reduce your premiums, because cover higher deductibles feel risky.

What’s the Way out of the Insurance Deductible vs. Premium trap?

With the right amount of insurance, the right kind of insurance, and most importantly, the right approach to insurance, you’ll never be “insurance poor.”

The right AMOUNT of insurance.

Get the coverage you absolutely need, without paying unnecessarily high premiums.

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