ARTICLES
Are you sick of your policy increasing in price every year? Wondered if there is a better way? A Level Premium policy might be the one for you!
The most common type of policy is on a Stepped Premium, that’s the one that increases every year. So why would you want a Level Premium policy?
A Level Premium policy is where you pay for a fixed price over a period of time. This means that your cover stays the same price each year rather than increasing as you get older.
Here’s the math.
A 35-year-old female takes out $500,000 life cover today on a Level policy to 80 years old.
The cost of the cover is $39 p/fortnight. This price stays the same until she is 80.
If she was to instead take a Stepped policy of $500,000 life cover, the cost would be $14 p/fortnight, but that $14 will increase each year.
By choosing a Level policy today, forecasting predicts that she would spend around$263,368 less in insurance compared to if she kept $500,000 on a stepped policy until she was 80!
This is because by Levelling she has locked in her price of cover with the insurer and is therefore able to reap the benefit over time.
Projections of the premium suggest that when the 35-year-old is 65, this $500,000 cover will be costing her 192.64 p/fortnight if the policy is on a Stepped premium compared to her locked in Level rate of $39 p/fortnight.
Not only do we save thousands in the long run, but the cover also stays affordable later in life.
This means we can keep our cover longer and when we are statistically more likely to need it.
For advice that matters in future proofing your insurance, I’m ready to chat when you are.
The information contained in this article is not personalised financial advice, this is purely information based and should be interpreted as such.
Published 01/02/21 - Josh Cuttance
What if I asked you, how much do you spend on groceries a month, what would your answer be?
Is it one that rolls off the tongue? Or would you say, ‘I need to check my spreadsheet’.
Most likely your answer would have to be a guess based on your last shop.
What about how much did you spend on take-away coffee at your local in 2020?
Now that one is harder to know and one that many of us would likely be pretty keen to not find out.
The point is, budgeting and tracking spending isn’t easy. In fact it’s something that many of us don’t have the time to do, or so we think.
“So how do you suggest I budget, Josh?”
First of all we need a goal. A clear goal for what we need or want gives us something to focus on and also sacrifice for when that ‘buy it’ voice in the back of your head speaks up.
Goals can be anything from; upgrading the family car, purchasing your first home, an investment property, growth of an investment portfolio to a specific level, saving 1 month worth of expenses to stop living paycheck to paycheck.
Ideally when we set goals like this, we want them to be ones that will have a positive influence on our own financial position. This means when we hit our goal, not only have we made an achievement, but we are in a better place for it.
My preference for budgeting is through the use of digital budgeting platforms that allow us to set goals, track our savings or debt repayment progress and also see how much we have spent in specific areas, for example all of those takeaway coffees or other impulse buys.
Here are some apps that are worth taking a look at to enable more conscious spending habits in order to smash your financial goals:
Pocketsmith - https://www.pocketsmith.com/
New Zealand owned platform that allows you to forecast cashflow, set category goals and use detailed reporting to understand more about how you are using your money.
• Account transactions need to be uploaded manually if using the free version, otherwise it costs $9.95 p/month and then your transactions are automatically uploaded into the app.
YNAB (You Need A Budget) - https://www.youneedabudget.com/
Available as a desktop and mobile app, this platform uses a ‘money envelope’ type system where you allocate your money into ‘envelopes’ and look to virtually fill these envelopes each month or payday. The focus is on having full envelopes each month and to stop living paycheck to paycheck.
• Account transactions need to be uploaded manually with this software
• Costs approx. $4 p/week NZ
The great thing about both of the above budgeting apps is that there are tons of explainer videos on Youtube that help you get set up and fully understand the way they work.
For those who are BNZ or Westpac customers, both of these banks have apps that provide some form of account tracking and categorization which are handy tools, particularly because they are free to use. The key difference here however is the inability to set specific saving or debt repayment goals within the app making them less intuitive and customizable.
Whatever you use, make sure it is something that you are willing to regularly interact with. Budgets need to be things we are reminded of often so that we check in on them often in order to smash our financial goals.
Published 28/01/2021 - Josh Cuttance
