Mickey On Money

Posted on December 18, 2010 by Mickey Smith

How much do I need to retire?

It’s a question everyone asks themselves: how much do I need to retire?

The rule of thumb is that once you retire you will need to receive 85 percent of what your salary was when you were working.

So, if you used to make $100,000 a year when you were working, you will need to receive $85,000 a year in retirement to live comfortably.

That’s the simple part. The difficult part is figuring out how much you need to save to receive 85 percent of your salary each year in retirement.

A recent article published in Kiplinger’s Personal Finance noted that Hewitt Associates recommends saving 11 times your annual salary before retiring.

According to their calculations, if you earn $50,000 a year you will need to save $550,000.

If you withdraw four percent a year, or $22,000, from your retirement fund and then you receive another $20,000 from Social Security, that will get you to 85 percent of $50,000.

If you continue to work part-time in retirement or you receive a pension or some other form of income, then might not need to save as much.

On the flip side, who knows what’s going to happen to Social Security in the next few decades.

Well, there you have it. Next time you wonder ‘how much do I need to retire,’ you’ll know that roughly speaking you’ll need 11 times your annual salary.

Posted on December 18, 2010 by Mickey Smith

Cheap car insurance

Here’s a simple formula for getting cheap car insurance: shop around for the lowest price, ask about discounts and then buy the minimum amount possible.

I’m not saying that’s the right thing to do. I’m saying that’s how you get cheap car insurance.

There are different types of car insurance.

For the most part, we’re only concerned with auto liability insurance. This is the kind that most states require you to have.

It’s made up of two parts.

The first is something called bodily injury liability. This will pay for your medical expenses and anyone else injured in the accident.

Bodily injury liability does not have a deductible.

You need to understand that if you buy the minimum liability insurance, it may not be enough to cover a serious accident in which people are seriously injured and sue you for pain and suffering.

Just a head’s up.

To help with that, there’s medical payments coverage. This type of car insurance will pay expenses for yourself and your passengers if you are in a serious accident – even if it’s not your fault.

One more head’s up: the medical payments coverage probably won’t pay all the medical expenses.

The second part of auto liability is concerned with paying to repair someone’s property if you caused the damage. For instance, there’s an accident and you hit their car or house.

How much of this cheap car insurance should you buy? Depends on your assets.

For people who have a house and other assets, it is generally recommended that you purchase at least $100,000 in bodily injury coverage per person, $300,000 in bodily injury per accident and $50,000 in property damage.

If you don’t have as many assets, you can revise those numbers down to $15,000 for bodily injury coverage per person, $30,000 in bodily injury damage per accident and $10,000 in property damage liability.

Car insurance discounts

Don’t forget to ask your insurance agent about discounts. There are lots of them for car insurance so make sure you don’t miss out.

If you are a single woman over 24-years-old, you should qualify for cheaper insurance. Ditto for a married man over 24.

Single men typically don’t get the price break until they turn 30.

Also, ask if your car is on the list of the insurance company’s “low risk” automobiles.

In addition, tell them if you get good grades in school and whether you have any safety features on the car such as air bags, anti-lock brakes or an alarm.

If you’ve got other ideas about cheap car insurance, leave me a note in the comments below.

Posted on December 18, 2010 by Mickey Smith

Medical bills and your credit score

Unpaid medical bills are among the most common problems on credit reports.

According to a 2003 study by the Federal Reserve, more than half the incidents reported by collection agencies stemmed from unpaid medical bills.

Among those unpaid medical bills, 99 percent were for $5,000 or less. In fact, the average unpaid bill was only $386.

So, suffice to say, the fact that these bills go unpaid is probably due to them being overlooked rather than being unaffordable.

How can they be overlooked? Well, you may be sick or otherwise out of commission and not paying close attention to the bills you need to pay.

Also, it’s easy to get confused about what’s owed because of the various notices that come to your home from the doctor’s office, from the insurance company and, sometimes, from a separate billing agency.

Here are three things to do to keep medical bills from ruining your credit score:

1. Stay in touch with the doctor’s office. Call the billing department and make sure you pay your bill before they refer it to a collection agency. If you need to delay payment, make sure you tell the doctor’s office beforehand so that they know to expect it. Remember, the doctor would rather get paid by you rather than selling the unpaid bill for pennies on the dollar to some collection agency.
2. If the bill has already gone to a collection agency, call them and tell them you will pay as long as they don’t report the past due payment to the credit agencies. Try to get it in writing if possible.
3. Check your credit report once a year. If you see any unpaid medical bills on the report that you didn’t know about, try to get them rectified as soon as possible.

It’s relatively easy to prevent unpaid medical bills from going on your credit report so long as you make sure to get them paid.

If you don’t keep track of them, they will certainly come back to haunt you the next time you need to refinance or get a loan.

How? You can count on a much higher interest rate and thousands of dollars in fees at the loan’s closing.

No one wants that to happen.

Posted on December 17, 2010 by Mickey Smith

Types of mortgage lenders

Who’s going to loan you the money for your new home? Who’s got the cash to cover your home mortgage?

No matter who does it, let’s make sure we understand a few terms first.

You might hear someone use the term ‘originate.’ To ‘originate a loan’ refers to the process of putting together all the paperwork associated with the mortgage. There’s a lot of dead trees to collect.

Once the paperwork is put together, it will go to an underwriter who makes a decision on whether or not to approve the loan.

Now that we know who’s who and what’s what, you need to know that there are lots of different places you can go to get the money. Here’s a list:

1. Credit unions. These are often a good source of home mortgages because they offer competitive rates. If you are a member or otherwise ‘affiliated’ with the credit union, you might qualify for a mortgage with fewer fees and a lower interest rate.
2. Saving and loans. Another good source for a home mortgage. S&Ls provide more than half the residential loans in the United States.
3. Mortgage brokers. These are essentially middlemen who take your application and then submits it to a lender who underwrites (remember, approves) and then closes the loan.
4. Mortgage bankers. These guys are different from a broker in that they originate the loan themselves and then close it.
5. Commercial banks. The commercial banks deal mostly with commercial loans but they’re known to offer home mortgages from time to time, especially in small towns and rural areas.
6. Builders and developers. Sometimes, builders offer residential mortgages because it makes it easier for them to sell and finance the home all at once.

Posted on December 5, 2010 by Mickey Smith

What should my homeowner’s insurance policy cover?

In general, a homeowner’s insurance policy covers the house and its contents.

Most of the time, the contents will be insured up to 50 to 70 percent of the amount you insured the house for.

So, if you insured the house for up to $400,000, your homeowner’s insurance policy probably covers the contents of the house for $200,000 to $280,000.

Many insurers recommend that you review your policy every three to five years.

That’s because many people underinsure their home.

Remember, you should buy enough homeowner’s insurance to be able to rebuild the house and replace its contents in the event of a fire, a tornado, a robbery or some other disaster.

The amount of homeowner’s insurance should not be based on the market value of the home.

As for the contents, it’s a good idea to do a home inventory every two years to make sure you’ve got an adequate amount of homeowner’s insurance to cover the cost of replacing those items. The total should be less than the 50-70 percent figure we talked about above.

Also, make sure you tell the insurance company if the cost of a home improvement exceeds $5,000. They might not cover it in your policy if you don’t give them a head’s up.

One other thing to keep in mind what’s covered: many policies typically include liability coverage to protect you in case something is damaged or someone is hurt on your property.

Many homeowner’s insurance policies limit the liability coverage to $300,000 but you can get more coverage if you want more protection. Some recommend going as high as one to two times your net worth.

It may be one of the only times you wish your net worth was lower.