Accelerated Wealth Management

I’m sure many people can relate to the quote “Too much month, not enough money“.   Being short of money in the family monthly budget happens to all of us on occasion due to unforeseen expenses or dare I say over spending.  When over spending effects mortgage, auto and other monthly payment obligations however it becomes a serious matter.  Late or missed payments are the main cause of lowered credit scores which can haunt a person for their whole life. 

One solution to over spending and to make sure monthly obligations are met is to go on an auto bill-pay plan that matches when a person gets their pay check.  The vast majority of W2 workers today are paid every 14 days or bi-weekly rather than twice a month or monthly which is even more rare.  With employers automatically transferring a high percentage of employees pay checks into their checking accounts today, doesn’t it also make sense to have a mortgage half-payment debited out of their accounts a day or two after they are paid to make sure this important obligation is met before any other spending takes place?  

If  this method is followed month after month and year after year, not only will a person be able to stay current on their monthly payments but there are many addtional benefits. 

Here are some of them:

• Smaller half-payments pegged to pay days make it easier to budget household expenses.
• Bi-Weekly payments mean 26 pay periods per year or two extra half-payments that can be applied against the principal balance of loans.  A $200,000 mortgage at 5% interest can be paid off 5 to 6 years sooner saving $40,000 to $50,000 of interest.
• Having the peace of mind in knowing monthly payments will always be made and made on time.
• Having the convenience and safety of ACH debits which are much safer and less hassle than dealing with mail, stamps & envelopes.

Auto Bill-Pay programs like this require very special system of handling funds that almost all banking institutions do not offer with their normal bank services.  They will most likely refer you to an outsourced partner or third party that will set up a half-payment debit system for you.  There may be some fees and a recurring debit charge but for more and more people today the results and convenience are worth it.

Since 2000, term life insurance premiums have been declining about 4% per year according to the Insurance Information Institute.  Premiums  are now 50% lower than they were a decade ago. Obviously the biggest reason for this trend is the mortality tables now being used by actuaries since January of 2009 which show people living longer.  These new tables show that a 65-year-old male is now expected to live to 85 where under old guidelines the life expectancy was only 81.  They also show that death rates for people in the 25 to 44-year-old age groups have dropped about 10% since 1994. 

Based on these trends, policy holders because they are living longer will pay premiums for longer periods of time for the same coverage which allows insurance companies to charge less. The biggest drop in rates are for term life insurance where there is no cash value.  A non-smoking 40-year-old male at todays rates can expect to pay an annual average premium of $350 for the pre-ferred rate class on up to $725 for the standard rate class for a $500,000 policy with a (10) year term.