Archive for April, 2008

Time is of the essence – Part 2 (Insurance Play)

In my last part of this series, I shared my view about “How Compound Interest can do Magic on your long term savings and even make you a millionaire in just $500/month before retirement if you start by age 25. Time is truly in control of our destiny.

Here is my next case which will also show taking age advantage reaps better rewards in a long term .

Life Insurance

I know as soon I say Life Insurance, oh yeah I want to have one. It is one of the topics which we always want to procrastinate next to making a Last WILL. I always recommend people to consider at least a small policy if you love your family.

I need to share a funny fact about Life Insurance. “You are never going to use a life insurance policy that you buy on your own life. After all, you will be dead when the policy pays out. Life insurance is therefore a gift that you give to someone else”

I am strong believer of protecting your Family first when it comes to emergency. The sole purpose of the Life insurance is to protect your family and other people who may depend on you for financial support when you die and not you. Life Insurance is a way to make your family safer when you suddenly disappear from this world. If you die, the people that are dependent on your financial support will lose that income, so life insurance can help cover some or all of that loss depending on the policy you choose.

But there are instances where life insurance can be beneficial even if you have no dependents, such as your desire to cover your own funeral expenses avoid putting that burden to your relatives.

If you couldn’t help anybody while you are alive, at least you shouldn’t bother anybody after you leave this world. That’s my 2 cents. So depending on your status, you either need a Life Insurance immediately or sooner. But sooner the better who save you some pocket money is my argument.

Who actually needs life Insurance? How much coverage they need will be covered in future posts. Let only stick to the point of finding out how buying a life insurance early and going long might save money you lot of money? Lock-in rates early and go long

There are different types of Life Insurance. I am only referring to Term Life at this point. Term life insurance rates are really at good and affordable.

Let say you are at age 35, good health and non-smoker. Most likely you will fit in the category of Preferred Plus rating which is highest rating given by insurance guys for an individual with clean health. You plan to take $500,000 term life insurance policy for 10 years. You might end up paying around $15-20/month. But if you just delay it, 10 years, the rate might double or triple the amount for another 10 years which is just waste of money. Check the table for different ages which clearly shows that if you buy it early you might be able to lock in lower rates.

Age 10 year
35 $185
45 $475
55 $994
65 $1575

One more thing, lot of insurance agents will tell you buy the cheaper 10 year policy and then buy another 10 year term when the first one runs out. Some companies even offer this strategy as a policy option they call “re-entry”. The problem with this re-entry policies is that you face all the medical and insurability issues over again. Some might say, you don’t need to do medical again but you never know the company policy at that time. If your health condition changes you may not get a new 10 year policy for the price you think.

And how much would you save anyway? Is it really worth taking a chance? Using the same health status for the 35 year old, a 45 year old can buy a 10 year policy for $475 and a 55 year old can buy a 10 year policy for $994. Let’s compare that with the 20 and 30 year policies:

Age 10 + 10 + 10 20 Year 30 year
35 $185 $385 $556
45 $475 $385 $556
55 $994 $556

Is this really a risk worth taking?

You endup paying more after 10 year and still more after 10 more years depending upon your health conditions. But if you buy 30 year premium today, the preferred premium of $529 is locked in for a period of 30 years. Check out the overall price savings, just doubling current 10 year premium prices for every 10 years. For 30 years, 30 * 556 = $16880 For every 10 years, 10 * 185 + 10 * 925+ 10 * 2000= $31100 It just double may be more taking the inflation and everything into consideration.

The 30 year level term policy cannot be changed by the company. You are safe for 30 years. But on the other hand,
if your medical condition gets bad after 10 or 20 years, you might not able to buy insurance or it might cost way too high to afford. It makes absolutely no sense trying to save money buying a 10 year policy. The added risk just isn’t worth it. I like to insist in a Texas way, Big&Hard truth is to lock your rates pretty much when you are young enough by going long which is the best strategy for long term. I will touch on savings for Kids education early in my next part 3.

Time is of the essence – Part 1

Time is Precious. Time can’t be brought back.

You might wonder, “Why is this guy telling me the fact which we all know?”.

I truly agree, we all know very well about TIME. But I feel we should be reminded of its importance know and then. We think we have real good sense of TIME as we deal with it day in and out. But you don’t. We just let TIME slip away and lose everyday without making any progress in our goals whether its financially or . Don’ t you think we take TIME for granted. 

Today marks the one year anniversary of Virgina Tech massacre which killed 16 innocent lives. We all were sad when we heard the horror news. It seems to have just happened but one year just flew by taking along with us. I even wonder, I just celebrated my 31st birthday and now its time for the next one. I am growing older every day.

Without us noticing real hard, TIME just flies too fast, very fast these days. I don’t know why “Is earth moving fast ?” Not really but it feels like time is moving fast. Alright, as TIME is set to take us along the ride. If we don’t take timely decisions by playing along with TIME, we are going miss out on it. TIME is the real key for many of our life factors. It is a viable factor for your financial growth and all of our future.

Magic of Compound Interest

Compound interest is a very powerful formula if you have definite plan can make you a millionaire. Yep, No kidding!!! A little bit of money invested well over a long period of time can equate to a lot of money! It’s really a simple concept, but so many people fail to make use of the amazing power of compound interest. Compounding simply means you earn interest on the interest. In other words, interest is calculated on the basis of the principal sum plus any interest that has accrued — unlike simple interest, which is interest calculated only on the principal amount.

Let’s just take for how TIME plays in the Savings arena. Let’s say I have big junk of $50,000 right now at the age of 32 and I invest in a vehicle which returns me merely 6%(I feel to be safe than sorry than big returns). When I am 62 year, it will come back to me as $300,000 with yield of 250,000. Check the graph below with difference of compound interest on daily or monthly. Most banks do monthly compounding which is the market norm.

On the other hand, I just slept 10 years or didn’t have $50,000 early enough. So I was able to get hold of $50,000 when I am 42 years. I invest on the same vehicle for 6% return APY. Check out the return, its only 165,000.

See the difference 10 years can make for your investment. Its nearly $135,000 just gave away because I didn’t put money at the right time. Compound interest is so powerful and fantastic tool if used properly can yield good returns. Visit this site and try to calculate different variation and play with it to understand the compound interest magic.

Let me show the savings plan which can make you a millionaire. If you are 25 years and can put away $500 month in a investment vehicle which can yield 8% APR, you will be a millionaire at 66 years after considering taxes and inflation deductions.

(Graph Courtesy:

Click to check out this tool (courtesy: You can play with it to find your own plan to become a millionaire. It’s easy and simple if you stick with a good plan. I have more to show on how TIME can be a real genie when played well can make you financially strong for your future. Wait for my part 2.

My Wowing Cruise Vacation & Lessons Learned

I was soaking under the sun in the western Caribbean beach last week same time but now I am working hard to make some money. I know its back to reality time. This post is to brag about my 5 day cruise vacation and few lessons I learned.

If anybody like to know, How was the cruise? My answer – “What a WOWING experience to be on the Fun Ship?”

Life Mantra

As many of you know, my life Mantra, “Earn IT, Manage IT, Enjoy IT and Help IT” which I pretty much tend to follow. I truly believe enjoyment should be a part of your life and last of your life. If you only earn and forget or postpone to enjoy at the last min or last years. You have lost so many good years in your life to enjoy and have fun. I strongly disagree with people who say, you are in your prime years. So its time to make money now when you are good and you shouldn’t think about enjoying. That’s truly bad idea.

You can only enjoy certain things on certain age. When you are old, you might not have the guts to enjoy and adventure exciting things. Time is precious and you can’t never earn it back. So I strongly recommend, spice up your life with enjoyment and fun activities now and then. It will sure to recharge your batteries which helps to start back fresh.

Snapshot of Cruise Experience

I just assumed, I had short term memory loss and forgot all about my work, money and all other worries comes with it as soon I jumped on the new mini-world. The Ship in itself is like a own world out on the Sea. I would say “FUN WORLD ON THE SEA“. It has everything, I mean everything including people who just want to have fun and be happy. I also could literally see people from all over the world who can be categorized into 2 classes. One class working hard round the clock to make the other class happy. You name a third world country and I can a see a person mostly likely the cruise worker on the ship.

This is my first ever cruise in my life. We had so much fun on the ship and as well as on the shore excursions we did ourself. It was my first ever real vacation since so many year. It’s been long due and just get to do it.

I left for 5 days cruise from Galveston with my wife and 2 year old son Ashwin. We had good time together both in the cruise and visit to islands Cozumel and Progresso. We did some risky and adventures rides like jet skiing, kayaking with my 2 year old son. Days on the ship were fun with fun filled activities like playing Bingo(I even won $150 tasting the essence of my luck), doing my DRUMS in the Talent show in front of 1000 people and getting standing ovation and much more..

We felt 5 days is right period not too short and not too long. Except some toddler acts by my son now and then, we all some good family time together.

I strongly recommend everyone of you to consider going on a cruise at least once in your lifetime. I know I have seen people cruising for 10th times but that’s crazy. Like me, many think it’s expensive. For 5 days lodging, boarding, fun packed events, we only paid $400. Is that expensive when you think of going on 5 day vacation of Disney land? Not at all. Dec – April is a good time with less heat and less money on the cruise. During summer time it gets expensive. I have lot to talk about my cruise which I am planning to put another site for it.

One more thing, I don’t want to leave an impression that I did this cruise suddenly. No, It’s all well planned in advance. I put money aside for this trip in a short term savings. When I was financially ready, I made my plans. I shopped around for good deals. I made advance bookings to save money and made my plans for things to do. If you plan ahead, you can save money at same time have great fun.

Lesson Learned

During this short fun packed period, life did teach me some good lessons.

1. Don’t plan for full pledged Romantic/Family Cruise with a Toddler. It’s adds little more stress. But you can still have fun, just a little less if you take it slow and go with the flow.

2. In the cruise, when I first tried BINGO I never had intension to win but I won $150. I just played for the sake of playing it. But after that, I always wanted to win but never own once. What does it taught me? BINGO is a another type of gambling. It all depends on your luck. So if you are having fun, just have fun. If the luck shows up, just welcome and embrace it. Never try to force your luck to work for you. It never works.

3. When I see the cruise works on the ship, they work pretty hard to make us happy when we are in our vacation. Don’t ever think, you are working too hard. There are other people out there who work very hard then any one of us. What we have in our life are so much better so we shouldn’t crib about it. It also teaches me to push hard to work more.

I know these are simple ones but valuable.To conclude, plan for a break and venture out your inner dreams to have some fun with your family. At same time, look out for valuable lessons life can teach you..

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