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The following links provide detailed descriptions and reviews of, along with discussion questions for, personal finance simulation games.
"Build Your Stax" personal finance game - You have 20 years to make as much money as you can through seven different types of investments. As the game goes on, you'll be confronted with unexpected expenses that pop up in real, everyday life, costs like home repairs, family emergencies, and speeding tickets. Sometimes, you might gain money unexpectedly, too, like winning a prize or contest, or finding money on the ground.
"Time for Payback" personal finance game - Your ultimate goal is to survive to the end of the game, meaning you graduated college, managed to juggle all your priorities, and found employment with a starting salary that adequately covers all the debt you accumulated during your college years through your various choices and decisions. Will you make it?
"PlaySpent.org" personal finance game - Can you survive financially for one month? This is a very eye-opening, thought-provoking simulation. The decisions you'll have to make, and the situations you'll encounter, mirror everyday real life for a lot of people. You'll learn a lot about yourself, including your spending habits, your goals and ambitions, how you reason through decisions, and what you're willing, or not willing, to sacrifice.
"Monopoly" as a personal finance game - On the surface, it may appear that Monopoly is an awesome game when it comes to teaching entrepreneurship, and it is, right? But Monopoly is also wonderful at teaching us some things about personal finance, if we dig a little deeper.
Essays and reflections on the benefits of living simply, saving, and strategizing
The Minimalists - Meet The Minimalists, Joshua Fields Millburn and Ryan Nicodemus, who present a compelling case that getting rid of all the clutter in your life - the clothes you never wear; all the stuff in your basement, closets, and/or storage unit you're not using; the long hours you're working and mounds of debt you're taking on in order to keep up appearances and look "successful" to all your friends, neighbors, co-workers, and perhaps even family members ("Keeping up with the Joneses"), etc., etc. - can help you live a more meaningful, purposeful life. Learn a little bit about their personal journeys and how they, in turn, learned these valuable lessons in some pretty hard ways.
Dave Ramsey and The Minimalists - Learn how personal finance guru the legendary Dave Ramsey approaches the subject of money in comparison to The Minimalists. We'll discover that they arrive at the same conclusions, but perhaps just take slightly different perspectives to get there.
Building your own personal economy - Written in May 2020. If the coronavirus pandemic can teach us anything from a financial standpoint, it's that we each need to focus on building our own personal economies. We can't trust, or rely on, other people, politicians, or broken-down systems to do that for us.
Strategies for saving money
The envelope budgeting system - a timeless, classic strategy for easily paying the bills while paying yourself - if you're willing to cultivate and maintain a little discipline.
Browse our "Shopping" category - a collection of previous blog posts offering all sorts of tips and strategies on how to save money on groceries, dining out, car insurance, cell phone expenses, Christmas gifts, and a lot more!
Personal finance vocabulary list - a good starter list for high school students of common vocabulary terms, along with brief definitions and practical examples for each word.
Difference between stocks and bonds - a great blog post with easy-to-understand explanations about these two different forms of investments.
Living on your own, paying taxes, credit cards, understanding your paycheck, more
Getting Started Teaching Personal Finance - an awesome article written for Edutopia by Kailen Stover, a family and consumer sciences teacher in Colorado. From the article: "Lessons on credit and credit cards, taxes, and how to find an apartment and make the rent are invaluable for high school students. Here is a beginner’s guide to building hands-on and real-world opportunities into personal finance education."
Anatomy of a paycheck - a great video lesson, only a little over five minutes long, given by Sal Khan over at Khan Academy. In this video, Sal breaks down all the expenses and deductions that come with your paycheck. You may have heard of, or have already used, Khan Academy before. Launched by Sal himself, a Harvard and Massachusetts Institute of Technology (MIT) –educated former hedge fund analyst, the Khan Academy is a free online education platform. The Web site features an extensive variety of courses and tutorials in areas like math, science and engineering, computer programming, arts and humanities, economics and finance, test prep, career exploration, the college admissions process, and a lot more. Within the economics and finance course offerings, Khan has a subcategory devoted to entrepreneurship, featuring exclusive interviews and conversations he conducts with top entrepreneurs and business leaders.
If your school/district or home/family has a BrainPOP subscription, look these subjects up on BrainPOP for great video lessons, quizzes, games, and other learning activities:
Following, in alphabetical order, is a list of vocabulary words, along with my own definitions and explanations I wrote for them. These are ideal for high school students taking a personal finance class or simply wanting to get a better grasp of, or head start on, various money management concepts. By no means is this list of vocabulary words and their corresponding definitions and explanations meant to be exhaustive. Check back from time to time, as this personal finance vocabulary list for high school students may be expanded upon.
Budget - "A spending plan for your money. You are telling your money where to go and what to do." - Dave Ramsey
Checking - A checking account is an account you have, typically with a bank or credit union, allowing you to write checks to other people or to businesses without having to carry cash on you. The money for these checks comes out of your checking account when these other people or businesses cash your checks. These days, it's more common to see people using debit cards tied to their checking accounts for purchases rather than paper checks (see Debit). You are responsible at all times for keeping money in your checking account to cover your checks or debit card purchases. Not having enough money in your account when checks or card purchases are made against your account can result in heavy overdraft fees.
Credit Card - A plastic card issued to you by a bank, credit union, or credit card company. A credit card is a form of loan that must be paid back by you. When you use a credit card to make a purchase, you are not using your own cash to pay for the purchase. Rather, you are using money loaned to you by the issuer. Typically, if you don't pay your balance by the end of the month (or your assigned due date), you will also have to pay interest, which can be very high.
Debit - When we mention the word "debit," we're often talking about a debit card, but not always. A debit card is like a credit card, in that it is a plastic card with an account number and expiration date. It has your signature on the back. All like a credit card. The big difference, though, is that a debit card is backed by your own cash. It's really your money being used for purchases, not money loaned to you by a credit card issuer that you must pay back (and usually, with interest!) A debit card is usually tied to a checking account, meaning the money used to make debit card purchases comes right out of your checking (see Checking).
Debt - Put simply, debt is any amount of money, from one or from many different sources, that you owe. It could be money that you owe a family member or friend. It could be money you owe on credit cards, student loans, a mortgage, a car loan, etc.
Income - We usually think of income as money we earn from our jobs (wages, salaries, sales commissions, etc.), but income can come from a variety of sources. For example, income can be generated from investments you own, like stocks, bonds, and mutual funds. It can also come from rental income on properties you may own. In this scenario, you own a home, apartment complex, commercial property, or even land, and other people (or businesses) are paying you to live there or run their business.
Investment - An investment, simply put, is you giving your money to an individual, a business, a financial advisor, or a bank in exchange for the potential to get your money back, along with more money just for you giving your original money in the first place! We say potential, because it is possible for you to lose money. Your investments may come in the forms of stocks, bonds, mutual funds, precious metals, or business opportunities, to name a few examples. Check out this previous blog post on the differences between stocks and bonds.
Loan - A loan is money issued to you on credit. The money is not yours. You don't get to keep it. You must pay it back, usually with interest. A few examples of loans include credit cards, student loans, a mortgage, a car loan, and a business loan.
Mortgage - A type of loan you take out from a bank or credit union allowing you to purchase a home or perhaps even a commercial building, if you're in business. Like any other loan (car loan, credit card, student loans, etc.), it must be paid back with interest added.
Salary - A salary is a type of income that you make from your job. Usually, when we discuss the term "salary," we are talking about an income that you are guaranteed to make in a full year. For example, you may get a job someday with a salary of $60,000, as opposed to being offered a wage of, say, $25.00 per hour. A big benefit of being paid in salary is that you know for sure what you'll make in a year. A major potential downside, though, is that you will most likely not receive any additional compensation for overtime, holidays, etc., like hourly wage earners would typically earn. You also will most likely end up putting in many more hours during the typical workweek than your wage-earning co-workers.
Savings - Money that you keep on reserve for an emergency, a "rainy day," or maybe for a particular thing you'd like to buy someday. While many people think of the word "savings" as money that is held in a savings account or Certificate of Deposit (CD) at the bank, it doesn't need to be. In any case, savings is money that is usually easily accessible, meaning it's not tied up in investment or retirement accounts.
What do you think of this attempt to build a solid working start to a list of high school personal finance class vocabulary words? What do you think of the definitions and explanations of money concepts presented here? What would you change, if anything? What words would you add to this list? Please feel free to share your thoughts in the comments section below! We appreciate your insights and contributions!
As I'm drafting this post, I'm sitting in a high school personal finance class that I'm assisting in. I was last in a personal finance class a couple years ago, during the 2019-20 school year. Though the classroom teachers have been different, the content is largely the same, with many of the lessons and overarching concepts drawing from the work of Dave Ramsey and his team.
Dave Ramsey's teachings about saving, investing, budgeting, and spending wisely are phenomenal. A couple years ago, thanks to he and the personal finance class I was assisting in at the time, I tried a time-tested strategy known simply as the envelope system, or the envelope budgeting system. I'm still sticking to it, and it's working great for me.
I had a brief chat with the classroom teacher this morning about the immense value of a high school personal finance class. I told him that I have a love-hate relationship with the course. I hate it because it reminds me of all the money mistakes and poor choices I've made in the last 20 years. I never had a class like this, and had to learn by trial and error (mostly error) and my own research over the years. On the other hand, though, I absolutely love it. I love it because I'm genuinely excited for the futures of these students who are taking it. I love it because I still occasionally pick up strategies and ideas that can help me, like the envelope system. I firmly believe that personal finance should be a required course in high school, not an elective. My message to these students and to all of you who may be taking a course like this is: Take it seriously. Learn all you can. Take good notes. You have the greatest asset on your side right now - time. You have time. And if you treat your time like the wonderful asset it is, along with developing good money habits early on, then you can, in fact, become a millionaire at a relatively young age.
Anyway, the main point of this blog post is supposed to be that, if you're a high school (or even college) student taking a personal finance course, you should check out The Minimalists - Joshua Fields Millburn and Ryan Nicodemus, respectively.
The Minimalists' philosophy on money very closely mirrors Dave Ramsey's. In fact, Dave Ramsey has provided rave reviews for The Minimalists' books, and has made appearances in their film projects. But The Minimalists are approaching the subject of money from a different angle.
Whereas Dave Ramsey is largely more focused on the practical math and economics of saving, investing, and avoiding needless spending and debt, The Minimalists come at it from the perspective that getting rid of all the clutter in your life - the clothes you never wear; all the stuff in your basement, closets, and/or storage unit you're not using; the long hours you're working and mounds of debt you're taking on in order to keep up appearances and look "successful" to all your friends, neighbors, co-workers, and perhaps even family members ("Keeping up with the Joneses"), etc., etc. - can help you live a more meaningful, purposeful life. By living a simpler lifestyle and only holding onto the possessions that truly add value and/or joy to your life, you are able to devote more of your time, energy, and other resources to things that really do matter - to creative pursuits and hobbies that bring you joy; to the relationships in your life; to giving back to others; to making memories through unforgettable experiences like dream trips and life-changing goals you set for yourself; and so on.
So if you're a high school or college student taking a personal finance course, I highly recommend you look into The Minimalists on your own. Joshua Fields Millburn and Ryan Nicodemus truly are rock stars, in my opinion. Dave Ramsey agrees. Or do I agree with Dave Ramsey? Anyways, their books, blog, podcast, and documentaries on living a more fulfilling life are awesome. Their own individual life stories on where they came from and what ultimately led them down the path of minimalism are inspiring. Their philosophy pairs very well with Dave Ramsey's.
In closing, make use of the greatest asset you have right now - your time. Work your time wisely, and make your time work for you. Listen to us older folks. Don't commit 20 years of painful financial and lifestyle mistakes if you don't need to.
If the coronavirus pandemic can teach us anything from a financial standpoint, it's that we each need to focus on building our own personal economies. We can't trust, or rely on, other people, politicians, or broken-down systems to do that for us.
If you're one of my high school or college -aged readers, you have the greatest asset going for you right now. You have time on your side. Don't squander it. Harness its great power before it catches up to you and is gone forever. And if you're one of my older readers tuning in, it's better late than never, as the old saying goes. You can immediately commit to these principles and strategies today, and dramatically alter your course heading for the better.
Aaron S. Robertson
Backdrop
As time goes on during the lock downs and business closures throughout the country due to the coronavirus COVID-19 pandemic, we're seeing more and more of the devastating financial effects all of this is having on families and businesses. As I write this, well over 30 million Americans are now unemployed during the pandemic. Food insecurity is creeping in, and children are going hungry. Lines to drive-up food pantries are backed up for miles in some areas of the country. Protestors are demanding an end to the shutdowns, with many pleading that they simply need to return to work in order to support themselves and their families. Rents, mortgage payments, and other bills are going unpaid.
A problem exposed that transcends all politics and personal beliefs about the virus
For this discussion, try to set aside any political or ideological persuasion you may have. Whether or not you think the coronavirus is a hoax; whether or not you're in support of these lock downs/closures; whether or not you feel your Constitutional rights are being violated - none of that matters for purposes of this discussion. These issues will be tested and battled out in the court system in due time. In the meantime, there's one indisputable fact that we know for sure right now in this very moment, and that is the purpose of this discussion - we Americans are not saving enough, and, as we're seeing, we can't weather out a storm, be it in the form of a pandemic, a natural disaster, an individual job loss, or a widespread economic meltdown.
A case in point: Here in Wisconsin, the "Safer at Home" order went into effect on March 25. Granted, schools had already dismissed prior to that date. The school district in which I'm employed, for example, held its last in-person school day back on March 13. Now, the "Safer at Home" order was originally scheduled to go through April 24, but it ended up being extended through May 26. So, let's assume, worst-case scenario, barring any court intervention or the governor lifting it earlier, that the order will stay in place through May 26. In total, that makes for nine weeks between March 25 and May 26 - a hair over two months. As this page on the Wells Fargo Web site explains, we should ideally have 3-6 months worth of expenses tucked away in an emergency fund. That's the typical advice doled out by financial advisors and economists across the board. But families and business owners are really hurting right now, and we're not even at the full nine weeks yet. I'm writing this on May 10, and we still have 16 days to go until we reach May 26. And, in fact, families and businesses were already feeling the pain and pleading to get back to work less than one month into the order. Clearly, we're not saving enough. We're living paycheck to paycheck. But we're great at spending and racking up debt, as Warren Buffett recently pointed out in comments he made about Americans' use of credit cards.
We need to focus on building our own personal economies so that we have the resources to effectively navigate through the storms that undoubtedly come our way in life. And they come in all shapes and sizes - anything from an unexpected car repair to an accident or critical illness. Anything from widespread economic decline to - yes - a pandemic. Back to unexpected car repairs for a moment - this press release issued by BankRate.com in 2016 pointed out at the time that 63% of Americans could not afford to cover a $500 car repair or a $1,000 visit to the emergency room. Four years later, in 2020, those numbers haven't improved much. According to this article published by CNBC back in January, 41% of Americans can cover a $1,000 emergency with savings. That leaves some 59% who cannot. And when it comes to the current state of retirement savings, the picture doesn't look pretty, either. According to this recent Washington Post story profiling six retired baby boomers:
Half of American families in the 56-to-61 age bracket had less than $21,000 in retirement savings in 2016, according to a longitudinal study by the Economic Policy Institute that used the most recent available figures. A less formal survey last year found that little had changed. Forty percent of Americans over the age of 60 who are no longer working full-time rely solely on Social Security for their income - the median annual benefit is about $17,000.
Clearly, what we're seeing right now, is that it took this current crisis - the pandemic - to unmask (pun fully intended) the dire problem of Americans' lack of savings. Tens of millions of Americans not being able to fund an unexpected car repair or emergency room visit, with each individual incident scattered over a long period of time, isn't going to make the news or create large-scale economic disaster. The problem is there, but this type of occurrence isn't enough to expose the true nature of it. But bring tens of millions of Americans together, all at once, who have been out of work now for anywhere between one and six weeks or so, and the lid has been fully blown off. We can't hide it anymore. We're now clearly seeing the magnitude of Americans' lack of savings.
Roots of the problem
I'd imagine that our inability - or unwillingness - to save is largely due to our collective consumer culture. With credit so readily available, it's all too easy to want to live for today by splurging and borrowing against the future. Tying into this is the whole "Keeping up with the Joneses" mentality. It's a trap that's easy to get caught in when it seems like everyone else around you is doing it. But a couple other factors, I suspect, are also at play here.
In addition to the consumer culture/keeping up with the Joneses dynamic, I'm betting that another factor contributing to the problem is that we just don't want to imagine anything bad ever happening. We don't want to think about those things - an accident, serious illness, job loss, natural disaster, pandemic, economic collapse, death - the car needing to be repaired. And because we don't want to think about the potential for things to go wrong, we're naturally caught off guard and perhaps even shaken to our core when they do happen.
"Tens of millions of Americans not being able to fund an unexpected car
repair or emergency room visit, with each individual incident scattered
over a long period of time, isn't going to make the news or create
large-scale economic disaster. The problem is there, but this type of
occurrence isn't enough to expose the true nature of it. But
bring tens of millions of Americans together, all at once, who
have been out of work now for anywhere between one and six weeks or so,
and the lid has been fully blown off. We can't hide it anymore. We're
now clearly seeing the magnitude of Americans' lack of savings."
Finally, a third contributing cause that I see here at work is our dependency on "the system" stepping in and providing relief when things go awfully wrong. We've come to expect unemployment insurance and other programs that collectively comprise what we call the "social safety net" always being there for us and coming to our rescue. The problem here is that the social safety net is marred by bureaucracy, inefficiencies and backlogs, technical woes, budget cuts, and politics. When it comes to the unemployment system alone, today's front page section of the Milwaukee Journal Sentinel is replete with stories of working people still waiting after many weeks to receive their first unemployment payment. Furthermore, these programs were always meant to be a band-aid of sorts; a little bit of temporary help - a supplement in a jam. They were never designed to fully take the place of our own planning and saving. We can't rely on these programs like that.
What should we do about it? What can we do?
Fortunately, there are a number of tools and strategies we can implement to help us prepare for these situations and significantly mitigate the effects on ourselves and our families. We, alone, must do these things for ourselves and our families. We can't rely on other people, on politicians, or on broken-down systems to do these things for us. It doesn't matter who's in office. It doesn't matter how strong the broader economy is. We have to do this important work ourselves and resist the temptation to take the words and promises of others at face value.
The best part about these tools and strategies? It doesn't matter what your income is. Your income is not tied to your ability to save, mitigate risks, and build wealth. We know plenty of people earning six-figures who are sinking in debt, and we know plenty of people earning far humbler numbers by comparison who have become millionaires by faithfully following the 10 things millionaires do not do. You can start today with many of these items with the proper mindset and a little discipline.
First, let's talk about that mindset - I don't know if I've transformed into a jaded, cynical, bitter old man in my 30s, or if I've simply become more of a reasonable realist. For me, determining where that line is can be difficult sometimes. But here's my philosophy and psychology in a nutshell, for whatever it's worth. It goes back to some points made earlier about people generally not wanting to think about bad things happening, only to be caught off guard when they do happen: If you can imagine it happening, it can happen. If it can happen, it's likely that it will happen. There's virtually nothing that surprises me anymore about the world - about how people react; about how we treat one another; about the motives of others; about bureaucracy; about chaos, destruction, disease, natural disaster, famine, mass death, economic collapse, situations beyond our control; etc. If it can happen, it's likely that it will happen. And that's why it's important to think in terms of possible worst case scenarios and hedge your bets accordingly in order to protect yourself and those you care about. That was the general gist of my post, "Cultivating many options," that I wrote back in mid-November. In that post, I argued the benefits of having a few backup plans always ready to go at a moment's notice.
"We have to do this important work ourselves and resist the temptation to take the words and promises of others at face value."
I love movies about Wall Street and the world of investing, and one of my favorite films of all time in this genre is The Big Short. Here's a clip from that movie:
Here are some particular lines from that above clip that do a great job of summarizing my overall mindset and approach to life:
Charlie: "Our investment strategy was simple. People hate to think about bad things happening, so they always underestimate their likelihood."
Narrator: "Their strategy was simple and brilliant. Jamie and Charlie found markets will sell options very cheaply on things they think will never happen. So when they were wrong, they were wrong small. But when they were right, they were right big."
The envelope system -Back in early March, I wrote a post about how I just started utilizing the envelope system for budgeting and saving, a strategy that I picked up from a personal finance class I assist in at the high school I work at.Since starting the envelope system, I've managed to save over $2,200 as I write this.Now, granted, I concede that this number may be a little artificially propped up by Wisconsin's "Stay at Home" order - it's hard to spend money when there's nowhere really to go. Nonetheless, $2,200 is $2,200. I wouldn't have it without this system in place. At first, it took a lot of discipline and getting used to. Now, it's second nature, and it's working really well for me. I love it. I could kick myself in the rear for not starting it earlier.
"It doesn't matter what
your income is. Your income is not tied to your ability to save,
mitigate risks, and build wealth. We know plenty of people earning
six-figures who are sinking in debt, and we know plenty of people
earning far humbler numbers by comparison who have become millionaires..."
The snowball method and the avalanche method for tackling debt - The snowball method is taught to students in our personal finance class. It's highly effective yet very simple to implement. This finance article on CNBC discussing ways to tackle credit card debt does a great job of explaining the concept:
Popularized by “The Total Money Makeover” author Dave Ramsey, the snowball method prioritizes your smallest debts first, regardless of interest rate. To try it, start by listing out all of your debts, smallest to largest. Pay the minimum balance on each one, except the smallest. For that one, dedicate as much cash as possible each month until it is repaid. Then move on to the second-smallest debt.
The idea is that you’ll gain momentum by watching debts disappear - as you would watching a snowball grow bigger and bigger - and that will motivate you to continue.
That same CNBC article describes the avalanche method this way:
To employ the avalanche method, list your debts from highest to lowest by interest rate. Pay the minimum balance on each, but this time dedicate as much extra as you can each month to the one with the highest interest rate.
Mathematically speaking, tackling the highest interest rates first is the most efficient way to handle debt because it eliminates interest as quickly as possible. The debts that would be racking up the most in interest are dealt with first, so you can minimize interest paid.
Both the snowball method and the avalanche method are effective for tackling debt. However, it should be noted that, according to this research conducted by Harvard Business Review on paying down credit card debt, which the CNBC article cites, the snowball method appears to be the best way to go because it's easier to stay motivated. There's a psychological effect at play here. You're more likely to see the total number of your debts disappearing faster, even though your higher-interest debts may be getting paid off last, and it's seeing the total number of debts shrinking that will keep you energized throughout the process.
Using cash as a negotiation tool - Who doesn't like cash? Once you start accumulating some through saving, budgeting, and knocking some debts out, you can use cash to your advantage in many scenarios where you're able to negotiate, not just buying a car. Mark Cuban and Dave Ramsey explain the benefits of using cash to negotiate.
Long-term care insurance - In December 2011, just days before my 29th birthday, I purchased a long-term care insurance policy. This Wikipedia article on long-term care insurance explains it well:
Long-term care insurance (LTC or LTCI) is an insurance product, sold in the United States, United Kingdom and Canada that helps pay for the costs associated with long-term care. Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid.
Individuals who require long-term care are generally not sick in the traditional sense but are unable to perform two of the six activities of daily living (ADLs) such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking.
Age is not a determining factor in needing long-term care. About 70 percent of individuals over 65 will require at least some type of long-term care services during their lifetime. About 40% of those receiving long-term care today are between 18 and 64. Once a change of health occurs, long-term care insurance may not be available. Early onset (before 65) Alzheimer's and Parkinson's disease occur rarely.
Long-term care is an issue because people are living longer. As people age, many times they need help with everyday activities of daily living or require supervision due to severe cognitive impairment. That impacts women even more since they often live longer than men and, by default, become caregivers to others.
Now, most people in their 20s aren't thinking 40+ years down the road. But if you're one of them, you have a great advantage. Generally speaking, time and health are on your side, and the younger and healthier you are when you purchase one of these policies, the lower your premium amount. The odds that you're going to need this kind of assistance when you're older are high. And a policy like this can help mitigate those odds by protecting your assets down the road from being eaten up by healthcare costs, not to mention relieving loved ones from the burden of having to take care of you. Insurance agent and financial advisor friends of mine tell me that purchasing a long-term care policy when I did was one of the best moves I could ever make. Many people who purchase these types of policies don't start thinking about and buying them until they're in their 50s or older - to a significant cost disadvantage.
Finally, on this subject, if I pass away prior to having to tap into this policy, all the premiums I paid into it will be returned to my estate.
Disability insurance - I purchased an individual disability insurance policy (individual meaning that it's not tied to my employer-sponsored benefits - I own it as long as I continue paying the premiums on it, regardless of employment status or job changes) back in June 2017. If I become disabled and, hence, unable to work, this policy will provide a guaranteed monthly income for a set period of time. Additionally, at the age of 65, with the way my policy is structured, I can have my premiums returned to me. The amount of premium returned to me will depend on the amount of benefits I took from the policy. If I never have to tap into the policy, I'll have 100% of all the monthly premiums I ever paid into the policy given back to me at 65. I look at this as sort of a forced savings strategy. If I pass away prior to 65, I can have the premiums I paid up to that point go to a beneficiary.
Disability Insurance, often called DI or disability income insurance, or income protection, is a form of insurance that insures the beneficiary's earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work. For example, the worker may suffer from an inability to maintain composure in the case of psychological disorders or an injury, illness or condition that causes physical impairment or incapacity to work. It encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD). Statistics show that in the US a disabling accident occurs, on average, once every second. In fact, nearly 18.5% of Americans are currently living with a disability, and 1 out of every 4 persons in the US workforce will suffer a disabling injury before retirement.
Job loss insurance - Not long ago, I purchased a policy from SafetyNet, based in Madison, Wisconsin. Unfortunately, SafetyNet is no longer taking on any new customers, but you should be able to find somewhat similar coverage through another provider. These types of policies are becoming popular.
Anyway, at the time I had their coverage, SafetyNet provided an insurance policy that protected against job loss on two different fronts - job loss caused by an involuntary, no-fault-of-your-own layoff/shutdown/business closure that would prevent you from working for at least 30 days, and job loss caused by a covered illness or accident that would prevent you from working for at least 30 days. I believe there were three levels of coverage. You could pay $5 per month for a payout of x. That was the lowest premium/payout amount. The payout may have been $1,000. There was an amount in the middle. And I chose the highest amount of coverage. I paid $30 per month - one dollar a day - for a payout of $9,000. Well, that ended up being a good decision on my part. I ended up filing a claim in early 2018 when the business I was working for was experiencing financial difficulties and had to lay me off. It really came in handy, and I was able to collect regular unemployment insurance from the state of Wisconsin, as well.
Now, for these job loss type of policies, one thing to keep in mind is potential tax implications. With me taking a payout on the layoff/shutdown/business closure side of things, the payout counted as income, and I had to pay tax on that $9,000 when I filed my tax return for the year. Well worth it. I would have had to pay taxes on that $9,000 anyway if I had earned it working. By contrast, you do not have to pay tax on a payout from a covered illness/accident claim.
Finally, here are some additional tips, strategies, and resources from personal finance expert Dave Ramsey that I highly recommend:
These are just a few things you may want to consider employing as you seek to build up your own personal economy so that you can navigate the challenging times and curve balls that life, without a doubt, throws at us from time to time. I also have life insurance (both employer-sponsored and individual coverage) and some investments in my toolbox, but that may be better suited for a future post here. I'd also like to write a post in the future about employee benefits. Depending on what your employer all has to offer, there could be some really nice gems that can further help you in mitigating risks and planning for the future.
What are your thoughts, observations, and experiences? Do you have any financial tips and strategies not discussed here that have served you well during times of uncertainty and crisis? We'd love to hear from you! Please feel free to share in the comments section below.
