Personal Finance Archives

Should You Take A Lump Sum Or Monthly Annuity Payments?

Should you take a lump sum or annuity payment?

Should you take a one time lump sum or annuity payment. Should you spread the payment out over the course of many years?

Believe it or not, you may actually get the chance to make a choice like this. And, you need to have all the facts and understand how your choice can affect your family.

Typically, we think of this choice when a new lottery winner is announced. We all tend to daydream about what we would do with a huge lottery win. It’s okay to dream of winning the lottery.

That dream should also includes how you would choose to accept the winning payout. Is a reduced lump sum payment better? Or, should you parcel out your winnings a little bit each year over the course of 20 or 30 years in the form of an annuity?

Now let’s flip this on its ear a little bit. Imagine the same questions with respect to a life insurance payout, your retirement nest egg, private pension plan, or an inheritance. Now, the chance of having to make this tough choice is a lot more realistic and likely than those dreaming of pocketing those lottery millions.

Benefits Of Taking A Lump Sum Payment

Should you take the lump sum or annuity payments over time? A dollar today is worth more than a dollar in the future. This is true thanks to inflation. It is not that a dollar is worth more because a dollar is always worth one dollar.

But, we can buy more things with money today than the same amount will buy us in the future. So, if you had the choice of a million dollars today, inflation alone would make you want to take it as a lump sum. You would not spread it out over years where your buying power will be reduced.

When Does Your Frugality Become Unethical?

by Hank Coleman

What’s the meaning of frugal? Can frugality become unethical? Can we take things too far? Where is the line we cross when pinching your pennies is no longer morally acceptable? Are some cases of being frugal borderline illegal too?

Potentially Unethical Frugality

Using your employer’s internet for personal use
Personal phone calls on company time
Personal use of the copy machine
Taking home ink pens, paper, and other office supplies from the office
Eat the free samples more than once at the grocery store instead of a real meal
Taking toilet paper from a restroom
Taking home extras like condiments from a restaurant
Bringing home the extra shampoo and toiletries you don’t use from a hotel – even if you’re living in a hotel

How To Think About Frugality Like An Economist And Save Money

by Hank Coleman

Is being frugal worth your time and effort? Can the law of supply and demand work in your favor to earn additional savings on your everyday purchases? Did you know that you actually hurting the US economy by saving your pennies and being too frugal?

You may be surprised to find out how you can save money when you approach think about frugality like an economist. Here are a few lessons from your economics class and how you can apply them to your frugal life.

Toilet Paper Is Worth More Today Than Tomorrow

If you won the lottery, would you want the lump sum payment today or would you want to spread your winnings out over 20 or 30 years? Thanks to our friend, inflation, you would be better off financially by taking the lump sum payment up front today. A dollar today is always worth more than a dollar in the future because of the effect of the time value of money and inflation.

These same economic theories can be applied to frugality and saving money on everyday purchases as well. When you stockpile toilet paper by the case after finding a good deal at the grocery store or discount warehouse chain, you are not only incrementally saving money on each item’s cost by buying in bulk. You are also saving money by not paying higher cost of the products later due to inflation as well.

20 Things I Should Have Known Better About My Finances

by Hank Coleman

I should have known better about my finances in my 20s. Heaven knows that I have made a few financial mistakes along the way.

This list of what I should have known better about my finances in my 20s is an attempt to help others before they make some of the same mistakes. It is not too late though to recover from your errors though if you have made these listed below.

20 Things I Should Have Known Better About My Finances

1. Don’t borrow from your 401k retirement plan. Even though you are paying yourself back with interest, you are going to be forever behind the retirement savings power curve.

2. Invest enough to get the employer matching contribution to your 401k Retirement Plan.

3. Whole life insurance policies are a waste of money. Term life insurance is a much better use of your money.

4. Your children don’t need any life insurance policies. You should have enough to bury them with your emergency fund.

5. Maxing out a Roth IRA is one the best things we can do. This should be your goal as soon as you are financially able after you start working.

I Fibbed And Bought A Bar Of Gold – Five Crazy Safes

by Hank Coleman

A few months ago, J. Money from Budgets Are Sexy showcased several very awesome manly piggy banks and crazy safes that people could buy on the internet. I fell in love with this bar of gold safe (see attached picture of my bar of gold below).

I have a theory that people will save more money if they have somewhere cool to put it. I have a jar labeled casino money that helps motivate me to save money! Just like nicknaming your savings accounts, naming your spare change jar can have a huge benefit and really drive your desire to save money for a specific purpose.

Here Are Five Cool Safes That Inspire Me To Save

1) Gold Bullion Bar Coin Bank

2) Grenade Bank

3) Vacation Fund Coin Jar

Harnessing The Power Of Compound Interest

by Hank Coleman

Compound interest is an amazing factor of investing and growing wealth. It is built into almost every financial calculation when looking at retirement, growing investments, and increasing your net worth. Even Warren Buffet said that compound interest played a large part in his accumulation of massive wealth.

Compound interest is what happens when the interest earned on an amount of money becomes part of the principal, and then more interest is then earned on that larger sum. You interest earns you interest. This continues to repeat, and the account is said to compound year after year with new interest being earned because you reinvested the old interest in your account.