Personal Finances

What is long-term care insurance?
Long-term care insurance is an insurance policy that that helps a patient pay for long-term care. The policy usually covers activities like bathing and dressing, rehabilitation, nursing facilities and other care-oriented activities for individuals with ‘cognitive impairment’ diseases like Alzheimer’s. It is generally best to buy long-term care insurance before the age of 60 for several reasons. Firstly, the younger you are the lower your premiums and chance of rejection will be. Another reason for getting long-term care insurance early is that, barring unexpected illness or accidents, there is a lower probability of getting preexisting conditions or falling seriously ill, factors that increase the likelihood of being denied access to the policy.
How old should you be to get life insurance?
There’s really no pre-determined age when it suddenly becomes necessary to take out a life insurance policy. However, if there are people who depend on your income – especially children or a spouse – there’s a major benefit to taking out a policy when you’re young. When you take out a policy in your 20s or 30s, the provider takes into account that you’re paying premiums for a number of years when, statistically, there’s relatively little risk that they’ll have to pay out. Unfortunately, that risk goes up a little with each passing year. It stands to reason that younger policyholders can lock in lower premiums than the aged.
Is life insurance good for mortgage protection?
If you are the primary wage earner in your family and you carry a current mortgage on your home, it is important that you consider risk management in the event that something bad were to happen to you. This is especially important if you do not have adequate savings for your family to pay bills and live comfortably in the event of your death. One of the best mortgage protection options is term life insurance.
How much life insurance is enough?
There are many factors to consider when calculating life insurance. Some of those factors include marital status, dependents, earnings of each spouse and how much time they have left to work. With life insurance, you want to avoid a situation where the insured is either under-insured or over-insured. Under-insuring means that there will not be enough money left over for loved ones and over-insurance is a waste of money in the unlikely event of a death. Most insurance companies say that a rule of thumb for life insurance is six to 10 times the amount of annual salary. Regardless of the source of the estimate, life insurance must be enough to replace the earnings of the deceased. In other words, the amount of life insurance taken out should be enough to replace the earnings gap that will be left behind when the breadwinner is gone and any additional expenses that might be incurred (estate tax preparation fees, etc.).
If I want to have some cash in a liquid account for unexpected emergencies, what is best? A savings account or another type?

It’s always a good idea to keep some money set aside in a liquid form, but it’s a double-edged sword, because the more liquid your money, the less it’s earning. If you never have an emergency, then you can miss out on the chance for substantial earnings by keeping that money in a simple savings account. A high-yield savings account may require you to maintain a certain minimum monthly balance.If you are concerned about liquidity but don’t feel like you need your money all in cash, you can also consider bond or certificate of deposit (CD) ladders. Mutual funds and money market funds are another option, but these generally require liquidation and three days or so to settle and make the funds available.It’s one thing to keep a few hundred dollars sitting in an emergency savings account with a very low interest rate, but if your emergency account has several months’ worth of expenses, then you might consider mixing and matching many different instruments so that your savings are still accessible (possibly on a graduated timeline), you avoid penalties for withdrawal and you maximize the growth opportunities available.

Why should I pay myself first?
The concept of “paying yourself first” is one of the pillars of personal finance and considered the golden rule by many financial planners. The basic idea is simple to understand. As soon as you get paid, put money into your savings account first. Before you pay your bills or buy groceries, set aside a portion of your income to save. Thinking of personal savings as the first bill you must pay each month can really help you build tremendous wealth over time.
When you prioritize savings, you’re telling yourself that your future is the most important thing to you, not the cable company. While money may not buy happiness, it can provide piece of mind. Finally, paying yourself first encourages sound fiscal habits. By moving savings to the front of the line ahead of spending, you have a better grasp on the role of opportunity costs and how they affect your choices. By automatically deducting a portion of your income, you’re able to set the money aside before you rationalize ways to spend it.
What is the “three-legged stool”?
The “three-legged stool” was a retirement terminology from the past that many financial planners used to describe the three most common sources of retirement income for a retiree during retirement – Social Security, employee pensions, and personal savings.
What should you do when you’re five years from retiring?
With just five years to go in your full-time job, it’s not too late to get a realistic retirement budget together. On the income side of the ledger, figure out how much you’ll reasonably be able to count on from savings, Social Security and Retirement Plans and if you’re lucky, a traditional pension plan. Then total your expenses. Factor in two of the biggest outlays anyone in their 50s or 60s should anticipate later in life: medical needs and long-term care.
Creating a budget can help you make minor adjustments to your plan that could make a big impact later. If you forecast a deficit, you may need to work a year or two longer, but at least you’ll feel more secure in your golden years.In reality, making decisions about where to put money and whether to buy insurance gets complicated. Often, it’s a good idea to talk with a knowledgeable financial adviser who can help you understand your options and chart the best course forward. Even if a consultation costs a few hundred dollars or more, sound advice can help put you on solid footing for the next phase of your life and provide peace of mind.
How do I retire?

When considering how to plan for retirement, firstly think about the age at which you want to retire and the lifestyle you want to enjoy. The older you are when you retire, the longer you have to save and the fewer years you have to support yourself out of savings; however, the older you are when you retire, the less you might be able to physically do and enjoy. The younger you are at retirement, the less time you have to save money, the less you may get in government support and the longer you must support yourself through savings.Once you’ve settled on an appropriate age, you must consider the lifestyle you want to live. If you want a glamorous lifestyle with expensive homes and vacations, you must have the savings set aside to support that lifestyle. The more moderate your post-retirement financial expectations are, the less money you need to have saved.After you’ve figured out your personal balance between lifestyle expectations and retirement age, you’ll be able to work on a budget that illustrates the amount you’ll want saved before you take the leap. Remember to factor in living expenses, long-term care needs, possible prescriptions, healthcare, relocation costs and more. Include your Social Security income as well as the continued, conservative growth of your savings and employer-sponsored accounts. After all, you won’t be emptying out your retirement accounts he day you retire; you’ll simply start taking distributions, thereby allowing the remaining balance to continue earning interest and investment growth.

What is a reasonable amount of debt?

It really depends on numerous factors – what stage of life you are at, your spending and saving habits, the stability of your job and your career prospects, your financial obligations and so on. But to keep it simple, let’s assume that you are employed in a stable occupation, have no extravagant habits and are considering the purchase of property.A good rule-of-thumb to calculate a reasonable debt load is the 28/36 Rule. According to this rule, households should spend no more than 28% of their gross income on housing expenses (including mortgage payments, home insurance, property taxes, and condo fees), and a maximum of 36% on total debt service (i.e. housing expenses + other debt such as car loans and credit cards).So if you earn $50,000 per year and follow the 28/36 Rule, your housing expenses should not exceed $14,000 annually or about $1,167 per month. Your other personal debt servicing payments should not exceed $4,000 annually or $333 per month.

Of course, the above debt loads are based on the present level of interest rates, which are currently near historic lows. Higher interest rates on mortgage debt and personal loans would reduce the amount of debt that can be serviced, since interest costs would eat up a larger chunk of the monthly loan repayment amounts.

Is it wise to consolidate credit card debt?
In most cases, credit card consolidation is a wise decision if you are able to get a lower interest rate with the new company at no or minimal cost to you. A credit card balance of $15,000 with a 19.9% interest rate could cost you as much as $2,985 in interest charges alone in a year if you continue to carry the same $15,000 principal amount. If you’re able to consolidate your credit and reduce your interest rate down to 9.9% (thru a consolidation move) you would decrease your annual interest down to $1,485 (assuming the same $15,000 balance throughout the year). This savings on interest can then be applied to your principal amount to help you get your debt paid off faster.
How do I know if I should refinance my mortgage?
The typical rule of thumb is that if you can reduce your current interest rate by 0.75-1% or higher, then it might make sense to consider a refinancing move. First step is to calculate your monthly savings should you do the refinance.If you plan on staying in the home for two years or longer, refinancing makes sense. Keep in mind that, during periods of home value decline, many homes get appraised for much less than they were historically. This may cause you to not have enough equity in your home to satisfy the 20% down, and may require you to put down a larger deposit than expected or you may have to carry primary mortgage insurance (PMI) which will ultimately increase your monthly payment anyways.
How do I stop emotional spending?
Emotional spending occurs when an individual spends money for the sole purpose of improving a mood. Some reasons people engage in emotional spending are to:
a) improve or maintain a mood,
b) cope with stress,
c) deal with loneliness, and
d) improve self-esteem.If care is not taken, emotional spending can lead to financial ruin. Emotional spending can lead to spending money on unnecessary purchases, which reduces the amount of money available for meaningful purchases or necessary savings. The problem with emotional spending is that it adds up and eventually you spend more than you need to.As with any other problem, the first step in dealing with emotional spending is to acknowledge that you are doing it. After that, try curbing your emotional spending by taking stock of what you own and calculating the cost of emotional spending on your finances. The best way to take a quick snapshot of your net worth is to create a personal balance sheet. After creating a personal financial statement, draw up a budget and be determined to stick to it. In your budget, be sure to include some miscellaneous cash for when you feel like spending outside the budget. Another way of stopping emotional spending is to find something else to use as an emotional boost or stress reliever. Research healthy activities that make you feel better, like exercise, reading, etc. Though it takes a lot of self-control to curb emotional spending, it’s worth it to avoid financial ruin.
Which insurance policies do I really need?
Your needs for insurance depend on your situation and can’t be generalized for everyone, but there are a lot of options available. Well, the answer is different for each person, so let’s look at some of the more common insurance options:
a) Health/Dental Insurance
Considered by many to be the most important insurance to purchase, especially if you have a family. Don’t take shortcuts here. If your company offers group insurance, compare those rates with individual polices to see which is better for your situation.
b.) Property Insurance (auto, boat, motorcycle, etc…)
If you have a vehicle, you’ll need to get insurance.
c.) Mortgage Insurance/Life Insurance
If you’re the main money earner in your family, what would happen to your home if you were out of the picture? Could your family still make the mortgage payments to continue to live in the home? If this is a concern of yours, then you might want to consider term-life insurance to cover your mortgage loan.
d.) Disability Insurance
If you’re concerned that, if you were to be injured, you would not be able to bring home a paycheck, look into short and long-term disability insurance. This insurance pays you a monthly check when you are unable to work due to a disability.
e.) Homeowner’s Insurance/ Renter’s Insurance
If you own a home or rent a home or apartment, you should consider this insurance to protect you and the property. It typically covers you if someone is injured at your home as well as the property inside and out.
f.) Long-term Care Insurance
This insurance coverage is usually not thought much about or purchased until an individual reaches age 55 or older. This coverage provides for nursing care and other home services in the event that you are unable to care for yourself or your spouse.


Estate Planning

What is an estate plan?
It is a plan of action for administering and disposing of property before and after death. The objectives of the plan are to care for yourself while you are living, and to provide for other persons and organizations both during your lifetime and afterwards.
Why should I bother with an estate plan?
Without an estate plan you might have insufficient income for your retirement years, and property you own at your death might not be distributed as you wish.
What sort of factors should I consider when trying to determine whether I need to do estate planning?
Estate planning is especially important for persons who are married, have children, and have accumulated property, but actually everyone should have an estate plan. The plan may be relatively simple when you are young, have few family responsibilities, and have not accumulated many possessions. It will necessarily become more complex as your responsibilities and possessions increase.
Does everyone need an estate plan (are there other ways)?
Some property can be transferred very simply. For example, a home owned in joint-tenancy-with-right-of-survivorship passes automatically to the surviving owner when the first joint owner dies. Also, you can transfer life insurance proceeds or remaining retirement funds through a simple beneficiary form. However, you are likely to own other things as well, so you need to provide for disposition of them. You also need to assure your financial security and delegate responsibilities if you become incapacitated.
What is a will?
It is a document whereby you provide for the management and disposition of your estate. If you die without a will, your property will be distributed according to the laws of the state in which you reside. Those laws may or may not express your intentions.
What is probate and why would I want to avoid it?
It is the process by which a court validates the will (if one exists) and confirms what the estate’s assets are, what debts and expenses need to be paid from the assets, and how the remaining assets are to be distributed.
You might want to avoid probate to eliminate probate fees (applicable in some jurisdictions), to expedite the settlement of your estate, and to maintain privacy about the distribution of your estate (a will is publicly accessible). However, probate has certain advantages, such as dispensing with claims against the estate. In many jurisdictions it does not increase costs or delay the settlement of the estate.
What needs to happen when a loved one passes away?
The first thing, of course, is to contact the funeral home that will be handling final arrangements, taking into consideration whatever written instructions the deceased may have left. Soon thereafter you should contact the attorney who drafted the will or another attorney if that person is no longer available, and that person will submit a petition to the court to probate the will. If the person died with a will, the court will appoint the personal administrator (also called “executor” or “executrix”) named in the will, unless there is good reason not to do so. If the person died without a will, the court will appoint an administrator for the estate.
The administrator, in consultation with the attorney, will then perform a number of duties including notifying heirs and creditors, valuing estate assets and investing assets, paying debts, filing tax returns, selling estate property as necessary, and distributing assets to designated beneficiaries or heirs.
What documents are included in an estate plan?
The central document will be the will, and possibly a trust agreement if the decedent had transferred property to a trust. Other recommended documents are:
A durable power of attorney, which authorizes someone to act for you if you are unable to do so.
Possibly a power of attorney over health care decisions, which designates someone to make decisions about health care, such as transference to a nursing home, if you are unable to make these decisions.
A living will (also called an advance directive) specifying your wishes about life-support systems if you are in a terminal condition.
A list of tangible items (jewelry, dishes, artworks, etc.) and who is to receive each. This list would be referenced in your will.
What is the difference between a will and a living trust? Which is better?
A will is a document specifying how your property is to be distributed and who will act as your personal administrator. The assets mentioned in the will remain in your name while you are alive.
A living trust is established when you transfer assets to a trustee that manages those assets and distributes income and principal per the terms of the trust instrument. In most cases, you or you and your spouse, would act as trustee and continue responsibility for investing the property unless you become unable to perform this duty, in which case your successor trustee would step in. You could withdraw money or other property from the trust whenever you wish, and you could terminate the trust at any time. Like a will, the trust would specify the beneficiaries who are to receive property at the end of your life or the life of your surviving spouse. You would transfer ownership of property from your name to yourself as trustee. The trust agreement governs only property that has actually been transferred to the trust.People establish living trusts to maintain privacy, to eliminate costs and delays that may be associated with probate, and if they own real estate in other states. If you own real property in another state, and that property is not in a trust, separate probate proceeding would have to be opened in the state where the property is situated.Although a living trust has these advantages, it also has disadvantages: you have to transfer title to assets to the trust; it can be somewhat cumbersome to administer; it probably will cost more than a will to draft; it generally will not reduce taxes; and it may not speed the settlement of an estate.If you establish a living trust, you still need a will to cover items (such as automobiles and other property) not transferred to the trust. Typically, people who establish a living trust have a will (called a “pour-over will’) that transfers to the trust everything that was individually owned, and the combined assets are then distributed per the terms of the trust.
What taxes are involved in my estate once I pass on? Is there a way to lower my tax obligation in my estate?

Only individuals with very large estate are now subject to the federal estate tax. If you are single, you will pay no federal estate tax unless your estate exceeds $5,250,000 (a number that is scheduled to increase with inflation). If you are married, you and your spouse together can give heirs $10,500,000 of bequests and taxable gifts free of tax.Certain states have a state estate tax, and the exemption level in those states tends to be lower than the exemption from the federal estate tax. Thus, there is a possibility that your estate would have to pay some state estate tax even if it pays no federal estate tax. Still, your estate must be relatively large for you to be subject even to the state estate tax.Charitable bequests are not subject to estate tax no matter how large your estate.If you leave heirs appreciated securities or real estate, their cost basis is “stepped-up” to your date-of-death value. That means they will pay tax only on gain that accrues following your death. All of the gain up to the time of your death will escape taxation.However, if you name heirs as beneficiaries of retirement funds (other than funds in a Roth IRA), they will be subject to income tax on the distributions. If a charity is beneficiary of those funds, it will not pay any income tax because charities are tax-exempt. Thus, if you plan end-of-life gifts to heirs and to charity, it is better, from a tax standpoint, to name the charity as a beneficiary of remaining retirement funds and give other assets to your heirs.

Do I need to see an attorney or can I write my own will?
You can write your own will provided it complies with the requirements for a valid will in the state where you reside. Generally, a valid will is typed, dated, and signed by the testator (person who executes the will) and by two legally competent witnesses. Although you can write your own will, it is highly recommended that you have an attorney draft it for you. You do not want to risk a mistake that might invalidate the will. Also, your attorney may prompt you to consider important matters that have not occurred to you.
Is it possible to provide a steady stream of income for my children from my estate and then a lump sum to my grandchildren?
Yes, you may establish a trust that would make payments to your children for the duration of their lives and then distribute the remaining principal to your grandchildren. The assets transferred to this trust are potentially subject to estate tax if your estate is large. The trust is not exempt from income tax, which means that trust income in excess of what is paid to your children, would be subject to income tax. Even so, this can be a good arrangement if you want to provide for two generations of heirs.An alternative is to establish a charitable remainder trust that would pay income to your children and then distribute the remaining principal to charity. This kind of trust qualifies for an estate tax charitable deduction, and the trust is exempt from income tax. A charitable remainder trust created at the end of your life is an ideal arrangement if you want to give children reliable income while also assuring a future charitable gift.
I have heard that it is possible to raise my income, lower my taxes, and make a gift to charity at the same time. If trust, how would I go about this?
There are two charitable instruments that would allow you to accomplish all of these objectives.One is the charitable remainder trust mentioned above. You would transfer assets, which could be cash, securities, or real estate, to the trust and receive income for life. If you are married, the income could be paid to both of you and then to the survivor. You could also have the income paid to someone else – an adult child, other relative, or friend. You may elect either a fixed amount of income or income that depends on the investment performance of the trust. You would receive an income tax charitable deduction, and you would avoid taxation on the gain in appreciated property you transfer to the trust. When the trust terminates, the remainder would be distributed to the charity or charities you select. The NAB Foundation is willing to act as your trustee and assist with the establishment of the trust.The other instrument that accomplishes all of the objectives mentioned above is a gift annuity. It pays a fixed sum to one or two beneficiaries for life. The amount paid depends on the age(s) of the beneficiary(ies). The older you are when you establish the gift annuity, the larger your payments will be, and they will never decrease no matter what happens in the economy. Again, you will receive an income tax charitable deduction. A significant portion of your payments is normally tax-free, especially if you contribute cash. The portion of the contribution that remains when the beneficiaries are gone will be used by the charity for the purpose you have stipulated. The NAB Foundation offers gift annuities and requires only a $10,000 minimum to establish one.


Capital Campaign

How does the NAB Foundation provide assistance?
The NAB Foundation provides in-depth consulting and guidance in raising funds to build or renovate or retire debt; A Feasibility study to determine church’s ability, need, and desire for a Capital Campaign; and detailed resources to aid in the Campaign, from launch to Victory Sunday. Our service is biblically based and culturally compatible with NAB churches.
What services do you provide?
We meet with your Church Leaders to review the project, assess all elements, and consider possible obstacles. We provide initial assistance in regard to a Feasibility study regarding the interest and capacity within the church. We meet with your Leadership Team at their first meeting to guide them in: Adopting a campaign calendar; Adopting a budget; and Reviewing goals as well as job descriptions. We also provide sample resources, recommend a Follow-Up committee and plan to see the commitments fulfilled. We pray with you for God’s blessing and the success of your campaign. The Foundation team is available to provide guidance through every step.
What is a Case Statement?
The Case Statement is the document that identifies what the campaign is all about. It will be developed in drafts, so it can be changed as the process unfolds. We can provide you with examples used by other churches. The Case Statement is critical to the overall campaign. This needs to be completed first. We have a document entitled “How to Write a Case Statement” that will help you with this once you get started.
What is a Feasibility Study?
The Feasibility Study is a scheduled time when we would come to interview a cross-section of your congregation to test the interest and capacity to raise your goal amount accomplished through confidential interviews. Immediately following that interview process, we would recommend to the church leadership how much we believe your congregation could raise over-and-above their regular giving in order to fund this campaign. In addition, there might be some obstacles and encouragements that we would share with regard to it, all learned in the interview process. This Feasibility Study is conducted once a solid first draft of the Case Statement is completed.
What is the time frame for a Capital Campaign?
There are variables that affect the time frame or segments of it, but an overall estimate is that it can range from six months to a year. We help you develop a campaign calendar from start to finish that is structured to serve you best.
What is the cost?
We can do it for a fraction of the cost that larger, for-profit companies may charge, yet with substantial results. Our fee for a specific capital campaign is proportionate to the projected goal amount. Please contact us for a current schedule of fees.
How many churches have you helped?
We have helped over forty churches with their capital campaigns. All of them have reached their targeted goals. References and testimonials are available upon request.
Whom can I call for more information?
Please call NAB Foundation at (630) 613-9365. One of our team members can respond to your questions and provide written information and illustrations to discuss with your advisors.