How Much Life Insurance Do You Need?

By Jeff Gilbert

Life is full of unpredictable events. If you start thinking about everything that could go wrong, you’ll give yourself gray hair and a hefty dose of anxiety. That’s where life insurance comes in. It may not solve all your worries, but it does protect your loved ones if the worst-case scenario becomes a reality.

But knowing you need life insurance is only the tip of the iceberg. Life insurance can be complicated and is not a one-size-fits-all product. Everything from the type of insurance you get to the amount of coverage you receive will depend on your unique situation. Even though there’s no exact formula, here are a few questions you can answer to help you evaluate your life insurance needs.

Is It Necessary?

Not everyone needs life insurance. If you have enough money saved so that your death would not create a financial hardship for your loved ones, an insurance policy might be an unnecessary line item in your budget. If you are a single young adult with no dependents, you may only need a small policy to cover the expenses of a funeral and burial. Take a good hard look at your financial situation and decide if life insurance is the right fit for you.

Permanent Or Term?

Now that you have an idea of how much coverage you need, you’ll need to choose the kind of life insurance that is most appropriate for your situation. Here’s a breakdown of the two primary types of life insurance.

Permanent Insurance

Permanent insurance is coverage that is not limited to a specific duration of time, meaning it can potentially last your entire life. There are several types of permanent insurance, including Universal Life, Indexed Universal Life, and Whole Life. The benefit of permanent insurance is that it can last longer than a term policy so that a death benefit will be paid to your beneficiary no matter when you die (assuming your policy has been funded properly). This type of insurance is typically more expensive than term insurance.

Term Insurance

Term insurance offers coverage for a specified length of time, which can be anywhere from 10 to 35 years. The downside to term insurance is that it only covers you for your specified length of time, so if you pass away after the term is over, no death benefit is paid to your beneficiary. But depending on your situation, you may only need insurance for a certain time period—until your kids are grown or you have enough money saved to avoid financial hardship. One of the major benefits of term insurance, as opposed to permanent, is that it is usually the most inexpensive out-of-pocket option.

What’s My Ideal Coverage Amount?

Finally, the question at the forefront of your mind. Here’s how to dig into the numbers to calculate how much coverage you need to protect your family adequately. 

The DIME Method

Conduct a needs analysis by separating your finances into different areas:

  • Debt and final expenses
  • Income
  • Mortgage
  • Education costs

In addition to these areas, two of the biggest factors that affect how much insurance you need are your marital status and your financial dependents. The more people depend on you, the more coverage you need. 

Multiply It

After calculating and totaling each of those dollar amounts, apply an income replacement multiplier to determine your needed coverage amount. The multiplier varies based on your age and the status of your home mortgage. For example, if you’re under 50 years old, you can likely use a multiplier of 20. Older couples may be able to use a multiplier of 10 or 15, depending on the number of years left on their mortgage. 

Keep in mind that these are just guidelines designed to give you a general idea of the amount of insurance coverage you need. There may be adjustments for your particular situation and what makes the most sense for your family. 

Put It All Together

You now have a sheet of paper with a lot of different numbers on it. Here’s how to put it all together.

  • Combine your annual income (plus the multiplier), your mortgage balance, your debt load, estimated future financial needs, and death expenses. 
  • Then subtract your liquid assets (think savings, life insurance policies you already hold, any college funds, etc.).
  • The number you end up with should give you a general idea of how much insurance you should buy. 

Now What?

If you’re ready to take the plunge into life insurance, it can be helpful to talk to a financial professional and review your options. Our team at Balboa Wealth Partners is experienced with insurance policies and can offer you guidance on the products available to you and how they can integrate into your other financial strategies. If you have questions about your life insurance policy or would like to schedule a review or discuss your options, give me a call at 949-445-1465 or email me at [email protected].

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With nearly three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout Southern California as well as Arizona, Oregon, and Washington. To learn more, connect with Jeff on LinkedIn or email [email protected]

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Chalice Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Chalice. Neither firm is affiliated.

BWP Weekly Market Commentary

BWP Weekly Market Commentary

BWP Weekly Market Commentary

What Should You Do About Market Volatility?

The U.S. stock markets had the worst day of the year on Monday, reacting to news of escalating trade issues with China and fears of an economic slowdown. After the Dow closed down 767 points, investors are understandably nervous. If you are worried about your retirement accounts, you’re not alone. But during stock market volatility, it’s important to keep a level head to avoid financial mistakes.

To put our current market environment in perspective, let’s take a look back at history. Single-day 1,000-point gains or losses for the Dow Jones have only happened eight times in stock market history, but in 2018 alone, there were five separate occasions when the Dow Jones moved more than 1,000 points in one day. (1)

It’s understandable to be worried with so much volatility in the air, but we want you to know that we’re here if you have questions or want to talk. Here’s what we recommend during times of increased market volatility.

Stay Calm

At times like these, it’s important to put current conditions into perspective. This is not the first time the market has taken a tumble and it won’t be the last. Declines in the Dow Jones Industrial Average are actually fairly regular events. In fact, drops of 10% or more happen about once a year on average.

Play Dead

There’s an old saying that the best thing to do when you meet a bear market is the same as if you were to meet a bear in the woods: play dead. While easier said than done, successful long-term investors know that it’s important to stay calm during a market correction. 

Market volatility has increased in recent years and the media can often make it seem like each episode is worse than the one before. In reality, volatility does not hurt investors, but selling when the market is down will lock in losses. We recommend not making changes in your long-term financial plan due to short-term market fluctuations.

Remember That Your Portfolio Is Diversified

Volatility and market declines are stressful. But keep in mind that while the stock market may be down significantly, your portfolio is made up of both stocks, bonds, and other assets that are designed to work together to decrease overall losses in times like these. If you have questions about your portfolio, please get in touch.

Review Your 401(k) And Other Accounts

Now is a good time to take a look at all of your investment accounts, including your 401(k), to make sure they are diversified well. If you have not reviewed your other investment accounts, get in touch with our office and we’ll take a look and offer recommendations to minimize potential losses.

Turn Off Your Phone (Or TV)

In today’s digital world, we have 24/7 access to the countless number of news media outlets. Because sensationalism sells, most of what you hear will be dramatic. While things may be down for the moment, history shows us that if you wait a couple of years, the gains will likely outweigh any losses you have experienced. 

For example, think back to where you were in 2000, 2011, and 2015, all difficult years for the stock market. Do you remember what you did then? Probably not. Over time, these swings look more like bumps in the road as you zoom out and put today’s upheaval into the broader picture. 

Speak With Your Advisor

Whether you’re new to investing or an experienced investor, it’s helpful to consult with an objective third party. Human nature causes us all to act out of emotion when our accounts go down. As an independent firm, we put your best interests first. We seek to serve as a support system for our clients, helping them make informed financial decisions that aren’t driven solely by emotion. 

We’re Here For Your Friends And Family

If you have friends or family who are worried about their financial plan, we are happy to offer a complimentary portfolio review and recommendations. We can discuss what is appropriate for their immediate needs and long-term objectives. 

Sometimes simply speaking with a financial advisor may help investors feel more confident and less concerned with the day-to-day market activity. We’re never too busy to help those you care about, so please forward this email if you know someone who needs our help.

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With nearly three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout Southern California as well as Arizona, Oregon, and Washington. To learn more, connect with Jeff on LinkedIn or email [email protected]

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Chalice Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Chalice. Neither firm is affiliated.

___________

(1) https://www.cnn.com/2019/01/01/investing/dow-2018/index.html

BWP Weekly Market Commentary

Love And Money: Financial Planning Considerations For Couples

By Jeff Gilbert

When you’re part of a couple, you’re a team. You plan vacations together and support each other’s pursuits, but do you manage your money as a team? Whether you have joint or separate accounts, are savers or spenders, enjoy talking about money or would rather stick your head in the sand, you’ve probably experienced the tension that finances can cause in a relationship.

Is it even possible for love and money to peacefully coexist? Here are a few simple strategies that may help couples avoid financial friction.

Be Honest

As nice as it would be, financial honesty isn’t a guarantee in a relationship. It’s important for both partners to offer full disclosure of their finances. You and your spouse should be aware of how you spend your money, especially when it comes to significant expenses, loans, or ongoing fees. By maintaining an open line of communication regarding spending habits and upcoming bills, you may be able to keep financial arguments at bay.

Time It Right

Since conversations about money are often emotionally charged, choose a time to talk about your financial situation or make decisions when both of you are at your best. Don’t wait until the end of a long, stressful day or right before you have to walk out the door. It’s also important to be preemptive, having discussions to set boundaries and expectations to avoid future problems. In other words, don’t wait until one of you splurges on a new TV or you go over budget on a vacation to set limits on spending.

Take Ownership 

Most often, one spouse acts as the Chief Financial Officer of the household, managing all bills, budgets, savings, investments, and insurance policies. However, it can be helpful for both partners to understand their financial situation. If time allows, sit down together once a month for a financial check-in to review credit card statements, account transactions, and other bills and check for any possible errors. Ongoing input from both partners will strengthen your relationship and create a true partnership.

Find The Right Fit

You don’t have to go far to find financial advice, but not every system or philosophy will work for your relationship. Glean ideas from experts, family members, or friends, but be flexible, allowing yourself to experiment and find a financial framework in which you both can thrive. Don’t be afraid to experiment with different methods of budgeting, saving, or debt payoff, and remember that as life changes, you may need to adapt your finances to your new circumstances. 

Reward Yourself

Set aside a portion of pocket money that you and your spouse can each spend every month on something you love, whether it’s a massage, a round of golf, or a steak dinner. Along with saving for long-term goals, set small objectives you can reasonably accomplish each month and celebrate your success.

Bring In A Third Party

Sometimes the best way to ease money tensions is to work with an objective third party, whether that’s a financial professional, a marriage counselor, or both. A financial professional can work with you and your spouse to review your financial landscape, identify any gaps in your insurance coverage, assist you in establishing short-term and long-term goals, help you stay on track, and provide professional and knowledgeable advice.

Although the topic of finance can occasionally cause tension, money doesn’t have to become a constant source of concern in a relationship. Invest the time to address spending habits and savings goals, uphold transparency regarding purchases, and communicate effectively.

How We Can Help

At Balboa Wealth Partners, we care about your relationship. We want to help you and your partner by walking you through the challenges of life and acting as your advocate as you pursue your financial goals together. If you know that your relationship and your finances would benefit from the objectivity and experience of a professional, we are here to help. Give me a call at 949-445-1465 or email me at [email protected] to set up a no-obligation appointment and start down the road to financial harmony. 

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With nearly three decades of industry experience, he has worked as both an advisor and executive level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals and to worry less about their finances and more on their passions in life. Based in Orange County, he works with clients throughout Southern California, as well as Arizona, Oregon, and Washington. To learn more, connect with Jeff on LinkedIn or email [email protected]

Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.

Securities offered through Chalice Capital Partners, LLC, member FINRA, SIPC.

Balboa offers advisory services independent of Chalice. Neither firm is affiliated.