Author Archives: Money Reasons

About Money Reasons

A offbeat personal finance blogger that comes from the tech world.

Why Are Auto Insurance Rates Different In Some States?

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Every wonder why Auto Insurance Rates differ in some states?

Car insurance costs far more in some states than others. Insurance industry experts reports that average annual premiums range from $934 in Maine to nearly $2,700 in Louisiana. Rates also exceed $2,000 in Georgia, Michigan and Oklahoma. A variety of factors influence prices in each state.

State Laws

Rules about insurance and driving vary from one state to another. Some legislatures have established high caps on auto-related medical claims. Insurers reacted by raising premiums so that they could fully compensate injured motorists. States also require different amounts of liability coverage; this has a significant impact on the minimum cost of insurance.

Young and elderly motorists frequently cause traffic accidents. Some states test these drivers more rigorously when they obtain or renew their licenses. If a state confirms that vehicle owners have adequate eyesight and driving skills, the roads are safer and people make fewer insurance claims. This allows insurers to charge lower premiums.

Risk Factors

Severe weather and other natural disasters also affect car insurance rates. This is particularly true in the southeastern U.S. Drivers can expect to pay more in regions that regularly experience floods, hurricanes or tornadoes. Natural disasters primarily affect the price of comprehensive auto coverage.

People tend to pay larger premiums in states with high property crime rates. Insurers must consider local theft and vandalism statistics when they issue quotes. States with numerous urban areas often experience more crime. Some drivers avoid the extra cost by installing anti-theft devices; this usually results in an insurance discount.

A few of the states with cheap auto insurance simply have less traffic. For example, there aren’t many large cities in Vermont or Maine. This greatly reduces the number of traffic accidents. Motorists may need to avoid the occasional farm animal or pothole on a country road, but they travel at low speeds and encounter few intersections.

Competition

Drivers typically receive lower quotes when more auto insurance companies have to compete for customers. Favorable climates, regulations and legal systems attract insurers to certain states. A competitive market may also encourage them to offer extra bonuses, such as roadside assistance or pet injury coverage.

It may seem unfair that some drivers have to pay much more for insurance than motorists in other states. However, it’s important to realize that people who pay higher premiums are more likely to make claims and recoup some of their money. State law may ensure that they also receive more compensation.

Hope you enjoy this hash of why car rates vary from state to state!

Scott

 

Last Quarter Cash Flow Changes

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I’ve been overzealous in my desire to save and invest more this year!

My plan was to max out my both my 401k and my Roth IRA, but with a twist.  The idea was to use my employer’s ESPP to save for my Roth IRA (and this has been successfully done), but also to take more out of my paycheck for my 401k contribution, the thought being that I would max my 401k contributions so that we could breeze though Christmas since my 401k contributions would be finished in November.  Unfortunately, that’s not going to happen, and that is all part of financial planning.  I underestimated my expenses and overestimated my income (slightly) and now it’s time to make some end of year cash flow changes.  Luckily, I control the dials on my financial engines, and all I have to do is make a few small adjustments to put myself back on a track that is realistic.  Below are those changes!

Getting Paid for recycling

Cash Flow Changes

  1. I now plan on back off the amount I’m saving for my 401k Contributions by 1 or 2 percent.  This alone will make an instant and dramatic impact.  Since I was shooting to get my 401k maximum paid off in November, this really won’t affect me other than make Christmas a bit tighter.
  2. I already kicked up my withholdings for taxes at the beginning of the year.  This is an easy dial to adjust, I reduced the amount by $25 and that move freed up an addition $50 a month.  Not a huge number, but it counts.
  3. The most important one is my ESPP.  I’ve saved enough from it to cover my Roth IRA, so now I’ll be able to transfer the amount from my ESPP saving into my checking account to cover the rest of the year, and the bills next year in January for Christmas 2013.  Originally, I had hoped to use this money for investments, but it obvious that the original path is not going to happen now.

Cash Flow Thoughts For Next Year

My basic plan is that I’m going to throttle my 401k contribution percentage down by 3% to 5% less than what I’m currently saving.  This will make a big difference I believe.  Then midyear next year, I’ll reevaluate how I’m doing and then maybe adjust the amount up if all is going better than I believed or do whatever is needed to make life for my family good.

On the ESPP front, I will continue to use it as a forced savings account for both my Roth IRA, and then later for investments or more than likely for basic living expenses since this is what I have to do this year.

I think the above cash flow changes should put me back on track to free up the flow of money for the rest of the year.  If it doesn’t, then I’ll adjust my budget again next month.

Bests,

Don

Both Best and Worst Personal Financial Times This Year So Far

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“It was the best of times, it was the worst of times“, the quote from the book: A Tale of Two Cities by Charles Dickens best described my cash flow activity pattern for this year, so far.

Let me explain…

RichPoor

“Best of Time” Financial Perspective

First, I now consider myself at the threshold of barely being in the “Upper Middle Class” as I wrote in my article called “My Personal Finance Pyramid Update Lower (Upper Middle Class)“.

I’m doing much, much better than last year in the stock market.  In fact, I’ve already beaten my “secret wealth goal” of increasing my by increasing my net worth this year by more than my annual salary.  In fact, I met this goal a few months ago before the market started to go sideways.  So a big booyah on the net worth increase for this year!

I’m trying to max out both my 401k and my Roth IRA for the year.  This isn’t an easy task, but so far I’m on track to do both.  While this is a positive action for the year, I have to admit, I’m really starting to rethink this goal.

While saving like a mad man, I’m also having my employer take out an ESPP contribution so I can earn that sweet 15% per quarter (not I said quarter, not year!) that program offers as an incentive!  Because of the bull market and my delaying my sale of the stock option, I’ve been able to achieve a bit more than 15% return on each quarterly contribution (not to mentioned that gain off of the money I reinvested after selling my ESPP options for the year).  While there is no doubt that the ESPP is sweet, I think it has more of an impact during a slow or even a bear market.  There would be nothing sweater than gaining 15% per quarter on the money than when the market is down 10%…

“Worst of Times” Financial Perspective:

So looks like I’m doing pretty good from the “Best of Times” piece above, and I am, no questioning it, it’s been a good year for everybody…

The main problem that I have is that I’m “Cash Flow” constrained.  Actually, cash flow constrained might be an understatement.  You see, each month I’m about 600 dollar short from break even.  Now a negative 600 hundred dollars cash flow adds up and hit one hard about… right now!  Yes, my checking account cash buffer has been depleted and it looks like I’m going to have to hit some of my investments to make it through the year!

Eating my investments, is definitely a negative, and feels a bit like I’m moving backwards (because I am).  Now I probably won’t need more than $2,000 to tide me over for the rest of the year, but I need to change my financial plans now instead of later, since it’s a self-induced financial problem instead of a spending/earning problem.

My next post will have a more detailed financial action plan, to reverse my cash flow stream, making it a positive flow again instead of a negative one.

 

Financial Emergencies Happen!

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Strange, But Real: Financial Emergencies

Accidents happen.

Sometimes saving for a rainy day is not enough, which is why financial planning requires more than just smart money management. Even companies with automated billing systems can make mistakes that could cost you if you don’t keep track of your bills. These accidents are a bit far-fetched, but things like this happen to everyone.

leaning tower of pisa

That Time The Power Company Mistakenly Billed You

Nelson Mandela received an apology after South Africa mistakenly sent him a notice for non-payment of his power bill. The amount due was a staggering $660 US, but the notice was meant for a different home. Mandela, aged 95, is actually recovering in a hospital from a lung infection and has not been home for the past two months. The company makes this mistake frequently but felt the need to issue an apology after the embarrassing mistake about the President’s account.

The Lesson

In the mortgage mishap of this last decade, there has been a lot of alleged foul play with big banks “forgetting” paperwork that homeowners sent in. Keep detailed records of all of the paperwork you send to banks, including dates and contact information for the agents you work with, and create a system of storing paid bills so that you can provide proof of payment if that is ever called into question.

That Time You Had to Pay a $20,000 Bond

A man from Eastern Missouri is facing a $20,000 cash-only bond for his alleged attack of a 13-year-old boy and two friends. He forced the boys to drink a shot of vodka before getting into fisticuffs with them, and when police showed up he brought the fight to them too. Bizarre, but true. The boys had wanted to mow the man’s lawn for a total of $20. He now sits accused of disarming a police officer and two counts of misdemeanor assault.

The Lesson

Ok, so you hopefully don’t go beating up kids but anyone can be pushed to the brink with the right choice of words. Even if you are a law-abiding citizen, mistakes can happen. Retain an attorney for you and your family, which will help in other matters too. Look for lawyers who offer free legal advice, and be wary of anyone who charges by the hour for phone calls and other menial visits. Knowledge of resources like ExpertBail.com is also nice to have around as a backup in case the judge orders a hefty bail for your court appearance.

That Time You Left $10,000 in a Hotel Room

When Cody Schaefer’s son walked into their Kansas City hotel room, Schaefer thought the kid was just playing around when he started rifling through the contents of their room. It turns out that his son uncovered $10,000 in neatly stacked bills. The boy, a cub scout, turned the money into the police. Police are unable to track down all of the guests at the hotel, and the money remains unclaimed. According to Missouri state law, that money may go back to the Schaefers if no one can prove ownership.

The Lesson

You probably shouldn’t walk around with your life savings in a suitcase. It makes for a nice effect in movies, but holding your money in an interest-bearing bank account is a much better plan. If you plan to conduct a large transaction with cash, like purchasing a car, do it with a cashier’s check made out to the payee. If you need to travel across state or country lines with more than $10,000 in cash, you will need to declare that money and be prepared to give reasons why you have that much.

In general, try to find safer ways to manage your money wherever possible!

(I’d like to thank Ryan for this entertaining guest post!  -MR).