Living Without a Salary

How to reduce your expenses, so you can live without a salary!

Honest Annuities Review June 15, 2010

For some reason, annuities are touted as a “valid part” of a well-rounded investment plan for seniors. However, this is about as valid for investing as sugar cereals are healthy for a healthy diet. In other words, annuities should be avoided in order to maximize your returns on your investments. Anyone who tells you differently is trying to sell you something. To be fair, however, I will explain what they are and why they are used before getting into why you should not use them.

Annuities Explained

According to Wikipedia, “An annuity contract is created when an individual gives a life insurance company money which may grow on a tax-deferred basis and can then be distributed back to the owner in several ways. The defining characteristic of all annuity contracts is the option for a guaranteed distribution of income until the death of the person or persons named in the contract. However, the majority of modern annuity customers use annuities only to accumulate funds and to take lump-sum withdrawals without using the guaranteed-income-for-life feature.

Put simply, annuities are the investment portion of a whole life insurance policy. You either put in all your money at once, and choose to receive the payouts immediately, or you can pay into the annuity with installments and receive the payouts at a later date. The payouts are based on how the market performs, up until a 12% interest rate of return. You don’t lose money, but you also don’t receive much gain either.

Why They Are Used

People use annuities because they are promoted as a way to protect investments in an “uncertain market”.  Annuities and life insurance provides death benefits, but they each have a different purpose. While life insurance provides a benefit if the insured dies early, annuities provide benefits if the insured dies late. Meaning if you were to outlive your retirement money. They are also used for protecting your investments, so you have money to live on when you are retired.

Beware!

That was the good part…now here is the part they don’t tell you. Annuities are designed to rip you off! How can I make such a bold statement? First off, think about who is selling your annuity to you–it’s not the investment brokers, but the insurance sales representatives. They are not even licensed by the Securities Exchange Commission (SEC) to sell you the annuity. How they can get away with it is because it is classified as an insurance product, rather than an investment product. Which means that they can get away with more than an investment broker could.

It’s Not Your Money

One thing that people are not aware of is that when they hand over their money to the insurance company to “buy” an annuity, they are giving up their rights to the money. “Wait a minute–are you telling me that the money I have is not mine anymore?” That’s exactly right–even though they tell you that you are “protecting” your money. So where does it go and who has control of it? If you guessed the insurance company, you’re right. They will take that money and invest it in the stock market just like anyone else could, and then pay you the dividends. However, the gotcha on this is that when you die, they are not obligated to give that money back to your survivors.

Your Bottom Line

It’s your money and your future that you are planning for. Don’t let it go down the drain just because some slick sales rep decides give you a slick presentation. Research your options before you sign on that dotted line and save yourself the headaches later on.

 

Prepaid Debit Cards June 12, 2010

There was a time when plastic was reserved for toys and bottles. Everyone used cash and store credit, or they did not buy what they wanted until they had enough money saved up to buy it. Today, everyone carries credit or debit cards, or perhaps a few of each. While I am not delving into the subject of credit cards today, I do want to talk about debit cards, and more importantly, prepaid debit cards.

What Are Prepaid Debit Cards?

Similar to bank debit cards that are connected to your checking account, a prepaid debit card works only when there is money “on the card”, or placed in your account. You do not need a checking account, as this is basically an online checking account.

Benefits of Prepaid Debit Cards

With a prepaid debit card, there is no need to carry cash when you are out shopping. (I personally like carrying cash, but that is another story.) You can use it just like a debit or credit card at many major shopping venues. You can have your check directly deposited onto your card, and you can pay bills with it just like your checking account debit card. And if you have bad credit, this may help you get started building up your credit again. Many companies will approve you with bad credit.

Disadvantages of Prepaid Debit Cards

In spite of how many benefits are presented to you by slick marketing websites, there are a few disadvantages to having a prepaid debit card. The fees associated with the card may be more than you would find with a checking account. Some have an activation fee or monthly fees charged to your card. Others will have ATM withdrawal fees or bill paying fees. Even just to get a paper statement, you may find fees. If you have a choice, maybe the fees route may not work for you.

Bottom Line

Prepaid debit cards are not for everyone. But if you are just trying to get a clean credit history again, maybe this is the next best thing to a checking account. At least you will not have a large bill to pay because of your shopping activities, as the money is taken directly from your account.

 

“How to Survive Without a Salary” Review December 1, 2008

Filed under: Reviews — joetb @ 3:50 AM
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In his book, “How to Survive without a Salary“, Charles Long takes a good hard look at the benefits of living a “conserver” lifestyle. A conserver lifestyle could be seen as “cheap” or “frugal” living…possibly done out of necessity or hardship cases. However, as Charles puts it, “…it’s a choice, not a life-long necessity.” Basically, living life on a lowered cost basis, rather than an earnings basis, is all how one deals with the rising costs of living in today’s economy. Many of his principles were solid and spot-on, including the idea that using and reusing something until it is un-fixable.

The conserver lifestyle is not to be looked on as being “poor” or done out of necessity. With the economy as it is right now, it makes sense to conserve and save money by using what others throw out, or do without, if necessary. Consumers consume…conservers conserve. What sounds thrifty: consuming or conserving?

If you are ready to start conserving and begin living without a salary–not money–but a salary, then follow me to find all the bargains, freebies and tips to reduce your expenses by at least 1/2!