When I took my first job out of law school, I couldn't have cared less about my law firm's short term and long term disability insurance benefit.  At twenty five, disability insurance seemed so worthless.  I mean, who at twenty five needs it right?

Well, two short years later I found out just how important it is.  Now, I always value this benefit. And, you should too.

How I Learned The Importance of Disability Insurance

When I was twenty seven, doctors found a mass in my brain that they were sure was a malignant brain tumor.  For several weeks, I thought that I was a goner.  Luckily, after having brain surgery, it turned out that I had a brain infection that was treatable with anti-fungal medication,.  But, prior to this better prognosis, short term disability insurance and long term disability insurance became VERY IMPORTANT to me.

While I was making great money at the law firm, I was facing a situation of being too sick to continue to work.  Worse yet, with brain cancer, I might have never been able to work again.  While facing such serious health issues, let me tell you the last thing I wanted to worry about was money.  Fortunately, my law firm offered 26 weeks of 100% pay short term disability insurance and 60% pay life time long term disability insurance.

Having this disability insurance in place allowed my family and me to focus on my health issues as opposed to money.   This event showed me just how important this insurance is.  To help you understand this insurance better, here is a short disability insurance guide that covers the high level basics that you need to understand.

Disability Insurance Guide

This introduction to disability insurance will discuss both long term and short term coverage along with the benefits and drawbacks of both.

One fact needs to be brought to the forefront in the beginning. Disability insurance is not designed to replace a person’s total income when an illness or injury prevents the person from creating an income. In most cases this is tax free income that is between 45% and 60% of a person’s pre-injury or illness salary.  However, with short term disability insurance many employers offer higher percentage plans or an ability to buy up.

The only purpose of disability insurance is to replace an income for any worker that becomes unable to earn an income due to an injury or illness not of their own making.

Short Term Disability Insurance

The short term disability is the insurance that covers the first 90 days or more of a working not being able to report to work. There is generally a 3 week delay in receiving these benefits. With most private insurance companies, this is at full to 60% of a person’s salary.

In my case, my law firm's short term disability insurance was self funded and they offered up to 26 weeks of insurance at 100% of my salary.  I was very lucky to have such good insurance.

Long Term Disability Insurance

Long term disability insurance is only for coverage after the expiration of the short term disability insurance term. With this type of insurance there are both private and federal policies. The federal policy is better known as Workers Compensation. This pays a portion of a worker’s salary and medical expenses along with some of the economic losses that may occur. Workers that are eligible for this type of insurance must have been injured on the job.

The private insurance coverage makes payments directly to the worker, but this is at a set rate that is rarely (if ever) more than 60% of that person’s previous salary. In most policies, if a person is collecting workers compensation, that amount they will receive could diminish the payments from the private insurance company. Each policy is different so the reading of the fine print is very important.

Since 3 out of 10 American workers are injured on the job or during their working life, disability insurance is very important. Just remember each policy is different and should be read in its entirety.

Have you ever needed to rely on disability insurance?  If so, I would love to hear your thoughts in the comments below.

For other great resources from this site please look at The Future of College Education.

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Being prepared for life as well as death is the responsible thing to do. To help with this the estate planning basics should be understood. This will be very helpful for those that are left behind so the financial worries of your estate will not be an issue. The proper planning will also help reduce the tax bill that could reduce what is passed on to your loved ones.

The first item on your list of things to prepare is your will. This is to help prevent your estate from becoming intestate according to the US. If this happens any claim on your belongings and holdings will have to go thru probate court. There is a standard formula for who can claim what in this court. In some cases when a petition from a relative is unsuccessful, the estate is claimed by the state and no heirs will receive anything from your life or any of its assets.  But, it is important for you to remember that estate laws differ among estates so it is very important for you to hire an estate planning attorney.

The main purpose of a will is to legally control who will receive what when you pass away. This is also where your last wishes are to be stated on any matter you may feel you need to express. This includes how you wish your remains to be treated along with any conditions you wish to impose on those inheriting your estate.

In your will it should be a stated who will be the guardian of your estate until all of the matters are fulfilled or concluded. This should be a trustworthy individual that is capable of carrying out your wishes including the distribution of your wealth, funeral expenses and the paying of the taxes. This person should know about this appointment before your death.  Do not let it come as a surprise to them.

There should also be an exordium clause included in your will. This is where you clearly identify yourself and declare this document as your last will and testament. This clause has to include the statement that nulls and voids all previous wills.

The last clause will avoid most court battles amongst family members. This is the non-contestability clause. This should state that if anyone in the will contests it for any reason; all of their claims to your estate are null and void.  But, again, you need to see an attorney in your state to find out the laws on wills in your state.  This article is not intended to be legal advice and you should not rely on it.

Of course these are just the simple estate planning basics that need to be followed. The consultation of a good attorney is also advisable.

For other great resources from this site please look at Stock Splits Explained and Money Tips. Another resource for financial information of interest can be found at Banks with Consistently Good CD Rates which is available on my other website of www.bestcdratestoday.com.

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Good morning all, I am pretty psyched about what I am about to tell you.  I recently stumbled upon Financial Samurai's Yakezie Challenge.  After reading through that post, I decided to take up his challenge.

The challenge is comprised of a group of personal finance bloggers who want to break the Alexa ranking of 200,000 by the summer.  Since I am joining late, I am giving myself until the end of the summer.

I can't wait to connect with the other Yakezie challengers.  I look forward to getting to know you all.

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As I mentioned in a previous article, I am an IA, I am reading Thomas Stanley's new book Stop Acting Rich.  The most significant characteristic among the wealthy and happy is that they live in houses below their means.

I think that this is crucial for new home buyers to think about.  If you want to enjoy life, you can't be worried about money constantly.  One easy way to put yourself in the position of always being broke is by buying a home that costs too much.

Key To Happiness

According to Stanley's research, people who live in houses slightly below their means are happier than people who live in houses above their means. I don't think that this is really surprising, but interestingly, the price of the house and the size of the mortgage is not the only reason for this.

People who live in wealthier neighborhoods are much more likely to suffer from "keeping of with the Joneses."  If you live in a house in a neighborhood that stretches your budget, chances are the people around you will own other things that you will have a hard time buying, like luxury cars, expensive home furnishings, and other expensive items.

While Stanley didn't put it into these terms, I think the key to happiness is contentment.  But, this is not simply a mental place that you need to take yourself to.  Instead, you need to put yourself in the best position to be content.

How To Live Below Your Means

This list is not exhaustive, but here are some things you can do to help you to live below your means and be content with your life.

• Live in a more rural area - your money will go a lot furth
• Live in a neighborhood that is in line with your economic level.  It is better to live in a slightly cheaper neighborhood than a slightly too expensive neighborhood.
• Find activities that you enjoy doing.  Focus on doing not buying.
• Make friends.  Hanging out with friends and socializing often costs a lot less than shopping.
• Focus on building wealth.  Change your mentality to one of thinking about how to make more money, how to invest your money and how to increase your net worth.  Use your money to make more money, not hyperconsumerism.

Don't Be House Poor

If you only take away one thing from this article, take away this - buying a house that eats up your cashflow is a sure road to unhappiness.  If you really want a large house, then save your money, earn more money and get increase your net worth before buying it.  Once you are wealthy, then buy your dream house.  By that time, you might learn that your dream house is actually much smaller than you otherwise thought.

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This is a guest post from Lakita Humber, the author of the new personal finance blog - Personal Finance Journey.   I encourage you to subscribe to Lakita's RSS feed and to follow her on Twitter.

Do morals and ethics guide the way we spend money?  Of course they do!  But to what extent?

For example, I'm sure we would all agree it is immoral to buy stolen goods.  Not to mention illegal!  We don't need our morals to guide that decision because the justice system has made it clear for us that purchasing stolen products is wrong.  However, there are other products and spending behaviors that are perfectly legal but ethically questionable or a matter of conviction.

Morals are simply principles of right and wrong.  An individual's unique moral code is developed over time and can be influenced by religion, environment, experiences and personal conviction.

A large percent of the population refuses to purchase products made with animal fur.  People for the Ethical Treatment of Animals (PETA) was organized to bring education and awareness about how animals are treated to create the products seen in retail stores.  Pressure from organizations like PETA and consumers lead to many retail stores removing fur products from their inventory.

Another ethically fueled product is the diamond.  Diamonds mined in some parts of the world are referred to as conflict diamonds or "blood diamonds" because they fund civil wars and insurgencies, usually in Africa.  In 2003, the Kimberly process was established an audit trail of diamonds from the mines to retail to ensure no conflicts or exploitation was part of the process.  While this greatly reduced the sale of conflict diamonds, the system is not fool proof.  Jewelers will offer certificates to show their diamonds are conflict free, however some consumers don't want to risk the possibility of their purchase contributing to foreign wars and avoid the purchase of diamonds altogether.

Furs and diamonds aren't common purchases.  Whatever stance you take is not going to impact your daily routine.  But what about where you shop?  Discount department stores such as Walmart are often the target of ethical debates citing the low wages for employees and threat to local businesses.

A hot topic is the personal finance community is the use of credit cards.  Adam Baker from ManvsDebt has taken a strong stance against credit cards and their reward programs, stating it's an industry that derives a large percentage of their profits from a select group of people who are caught up in destructive, cyclical habits.  There is an equal or possibly greater percentage who feels the use of credit cards as perfectly acceptable.

Other common choices include:

• dolphin safe tuna
• reusable diapers
• products not tested on animals
• biodegradables

The intention is not to pick a side on either issue.  I stated at the beginning individuals have unique moral codes.  The point is our spending patterns are often determined by more than cost and convenience.

What financial decisions have you made based on your own morals / values?

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As you go into the weekend, I thought that you might like some good articles to read.  Since this site's focus is on getting out of debt, I will highlight those articles first.  But, all of the articles listed here are great reads.

Wise Bread has a great article titled 5 Strategies to Wipe Out Your Credit Card Balance.  Think really hard about strategy number 5 - Earn More.  Too many people in credit card debt don't try to earn more money to get out of debt.  This is one of the easiest ways to get out of debt.  Short term pain for long term gain.

Generation X Finance has a great article titled Credit Cards and the Minimum Payment.  Minimum payments can be deadly.  Too many people think that as long as they can afford to pay their minimum payments they are not in financial trouble.

Lazy Man and Money wrote a great piece on Seven Things You Must Do to Prepare for an Emergency.  Given that the disaster in Haiti is on everyone's mind, I think that everyone should follow his advice and prepare for an emergency.  I would add one more thing - build up your emergency fund.

Christian Personal Finance has a an important article on How to Stay Out of Debt.  This article highlights once more that getting out of debt is not difficult to figure out, but requires lots of discipline.

Fiscal Geek has a great article about Why a Storage Unit is the Gateway Drug to Financial Ruin.  What a great insight!!  If you have so much stuff that you need a storage unit to hold it all, YOU BUY TOO MUCH STUFF.

Frugal Dad writes a great article on Saving With Purpose: Short Term Goals.  I love creating short term savings goals.  This is the best way to save money.

Well, I hope you like the above personal finance articles as much as I did.  Have a great weekend!!

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Egads!!  I am ashamed to admit this, but I must.  I am an IA.

Let me tell you right now, I don't want to be an IA.  But, if I am going to be brutally honest with my readers, I have to admit to you all today that I am.

What is an IA?

I am currently reading Thomas Stanley's new book - Stop Acting Rich.  According to Stanley, an IA is an income statement affluent - meaning someone how earns a lot of money but doesn't have much wealth to show for it.

The opposite of an income statement affluent is a BA, balance statement affluent.  This is a person who has a lot of assets.  The funny thing about the BA is that they don't necessarily make a lot of money.  But, despite this, they have a high net worth because of their frugal lifestyle.

How did I become an IA?

I would like to say that the only reason that I am an IA versus a BA is that I have a lot of student loan debt.  But, if I am being honest with myself, this is not the only reason why.

Becoming a lawyer has allowed me to make a nice income.  But, that privilege to work as an attorney came with a very high price tag - $150,000 in student loan debt.

While the first step to me becoming an IA was financing law school with student loans, the second reason why I am an IA is I bought a house before I had saved enough money.

When I graduated law school, I felt a ton of pressure to buy a house.  All of the partners in my law firm told me that I had to buy one to get the tax deductions.  Housing prices were going up every year due to the housing bubble being in full force.

Boy, thinking back on it now, there was a lot of pressure put on me to buy a house.

But, I fought off buying a house for five years after graduating law school.  But, with the birth of my second child, my wife and I decided that we needed more space.

During the five years prior to buying a house, my apartment rent was around $1,000 a month.  But, after buying a house, my home mortgage was around $2,200 a month.

The increase in my housing costs helped keep me in the IA camp, but it is not the full reason.  It was the fact that I did not save $1,200 a month while I lived in my apartment.

It is obvious that I could have afforded to save the extra $1,200 a month.  After all, I was able to afford my monthly mortgage payment.  If I had saved that money during those 5 years, I would have saved $72,000.  That would have been a huge down payment and a huge step in the right direction to becoming a balance sheet affluent.

Not saving that $1,200 a month for those five years shows that my spending habits are also keeping me in the IA category.  But, now that I have admitted this, I can start changing my life to become an BA.  And lucky for you, you will get to read about my journey

So, what about you?  Are you an IA or a BA?  Tell us about your story in the comments below.

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Today, I had the pleasure of reading No Debt Plan's article on living off of last month's income and I just had to share it with you.  Every one needs to read this article.  Then, once you finish reading that article, you need to read No Debt Plan's follow up article - Help Me Understand That Life Changing Concept.

In these articles, Kevin provides a great strategy for simplifying your life.

If there is nothing else I can share with you on this blog, let it be this: keep a one month income buffer....Here’s how it works: don’t spend the money you earn this month. You are going to spend it next month based on your monthly budget. That means you should be living this month on last month’s income. It sounds confusing, but it really isn’t. I think it is a simple system if you can get your head around it.

When I first read Kevin's articles, I got a little lost in Kevin's method for building up the buffer.  After reading it twice, I saw what he was doing.

But, for me, the real importance of the articles was not the method of saving the buffer.  Instead it was the buffer itself.

Stop Living Paycheck To Paycheck

I have written several times here about the need for an emergency fund.  Kevin's method takes this one step further.  Instead of just having an emergency fund, you also build a buffer in your checking account so that you are only spending last month's income.

I am not sure if I would build this buffer before the emergency fund or after.  I will have to think about that a little more.  My gut feeling is that you should build your emergency fund first.  But, maybe not.  You might get a bigger lifestyle impact from the buffer.

Either way, Kevin's articles are must reads.  And, I am going to start implementing this buffer.

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Wow, it has been an amazing few weeks and one of the most memorable Thanksgivings I have ever had.  On Wednesday, November 25, my wife gave birth to our third child, a baby boy named Jack.

It is times like these that life’s purpose becomes crystal clear – God, family and friends are all that matter.  I have to admit that I was not so thrilled to learn that my wife was pregnant with another child.  My wife and I just got through the diaper stage with our other two children and the thought of doing it all again was difficult.  But, within seconds of my son’s birth, I was immediately in love with him.

I don’t know if other fathers feel this way, but during the nine months of my wife’s pregnancy, the baby seemed so abstract.  But, as soon as I held him in your arms, it is hard to imagine life without him.

Too often I am so busy working that I lose track of the important things in my life.  Don’t get me wrong, I always love my family, but it is hard to get the work life balance tilted in their favor.

But, this Thanksgiving I am thankful that God gave me the gift of clarity.  The birth of my son the day before Thanksgiving allowed me to focus on those most important to me.  While my wife did not get to be home for Thanksgiving Day dinner, I brought her food and we got to celebrate together.  Also, my mother and sister’s family were nice enough to bring dinner and to stay with me while my wife was in the hospital.

Wow, what a great Thanksgiving!!

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Being "good with money" requires very little book smarts or knowledge, but instead requires a discipline.  What if I told you you only needed to do 4 things to change your financial life.  Now that is simplifying your finances.

Here are 4 steps to change your relationship with money forever.

Step One:  Stop Borrowing Money

The first step is simple, stop borrowing money.  Make a promise to yourself to stop borrowing money.  If you do this one thing, your money worries will be drastically reduced.

Step Two:  Wait 30 Days Before Making a Big Purchase

The second step is to delay making big purchases.  The goal here is to put an end to impulse purchases.  By waiting 30 days before making a big purchase, you give yourself time to really make sure that you want to buy it.

This step is really important because it will stop your from making stupid purchases.  We all do it.  We get it in our heads that we want something and then we go to the store immediately and buy it.  Then, several days or weeks later, we realize that we didn't really want it.  By waiting thirty days, you will give yourself time to make sure you really want it.

Step Three:  Build and Maintain an Emergency Fund

The third step to change your relationship with money forever is to build an emergency fund.  By building an emergency fund, you can stop worrying about money forever.

If you save six months of expenses in an emergency fund, you will have enough in savings to survive a layoff or other emergency.

Why will an emergency fund change you life?  It allows you to take charge of your life.  You are prepared for life's little emergencies.  You are in control.

Step Four:   Start Saving A Portion of Your Paycheck

By saving a portion of your paycheck you stop the endless cycle of living paycheck to paycheck.  If you spend everything that comes in, you are not getting anywhere financially.

There are many ways to save a portion of your paycheck.  I recommend putting money into your employer 401k up to your company's match and then into another retirement account like a Roth IRA.  The goal should be to max out the amount of money you can save in tax deferred retirement accounts, and then start saving money in other investments.

If you only do the following four steps, your financial life will truly be changed forever.  While none of these things are easy, if you focus on each of these, you can accomplish them.

If you would like to learn more about how to achieve financial discipline, please subscribe to my RSS feed.  Also, if you have done any of the above, please share your tips for how to achieve them.

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