Life Insurance Blog | Efinancial

How to Give Back in Hard Times

Times are tough, we all know this. There is an obvious incentive to save every penny that you can. It is easy to concentrate on your family and friends and their survival. It is easy to forget that there are others struggling as well. Charities, when the economy is doing poorly, tend to suffer even more than the average person. Compounded with more people needing charity during hard times, this can cause a lot of struggle for me people.

Life insurance can be part of a solution to helping charities in these times. For people who want to give to charity, but cannot afford the loss of money, can cash out life insurance policies or donate the whole policy to a charity. The cash value can be used by these organization to aid more people than they currently are able to.

Another possibility is to change the recipient of your life insurance policy to a charitable organization. If you are confident in your finances and perhaps have excess life insurance, then you can donate that money to a charitable organization, just like willing money to charity.

These actions can have the same tax benefits that donation in general has. If you are looking for tax relief, then donating a life insurance policy can have the same benefits.

To get a Term Life Insurance Quote or Research how to Buy Life Insurance Online visit Efinancial.com

Where is the Bailout Money Going?

The $700 billion dollar federal bailout plan is revolutionary in size and scope, including the involvement of the federal government in the banking system as preferred, albeit non-voting, shareholders. Many have been fearful that a mismanaged cash infusion would line the pockets of well-off bankers rather than benefit the financial well-being of the average American on “Main Street.”

According to a recent New York Times article, the additional funds are, thus far, not being used to foster increased lending but, in large measure, to buy up other banks. JP Morgan Chase is a case in point, receiving $25 billion dollars from the Treasury and using the funds to acquire smaller, ailing banks.

Such activity is not only being condoned by the U.S. Treasury, but actually encouraged. Treasury Secretary Paulson, among others, has promulgated tax code that allows the costs of mergers to be tax deductible, so taxpayers are footing the bill for large banks to pursue acquisitions, a macroeconomic benefit with far less obvious benefit to the average citizen.

Critics and cynics are given to wonder whether fewer banks are an asset or a liability for the US economy? Or is a consolidation of smaller, insolvent banks a smarter solution than simply buying up toxic loans and assets? If America behaved like England in this crisis, conditions of the bailout would require that any money given to banks be applied towards loans. Without these sorts of guarantees, will people lose faith in an economy that is doing poorly? We invite your discussion.

To get a Term Life Insurance Quote or Research how to Buy Life Insurance Online visit Efinancial.com

Gov’t Gridlock: Is America Paying the Price?

Is fractured government, divided government and political gridlock responsible for America’s financial problems? Based on recent congressional testimony, the answer that is suggested is affirmative.

In the House Oversight Committee, chairman Henry Waxman, and chairman of the SEC, Christopher Cox, exchanged pointed views on congressional breakdown while Allen Greenspan, former Chair of the Federal Reserve, and Tom Davis, senior Republican on the House Oversight Committee, pointed fingers at political parties, complaining about their responsibility for the economic collapse.

 

Waxman assigned blame to other congressional committees that failed to act in time, and the former Republican controlled House of Representatives. The congressional watchdog asserted the need for tougher regulations on businesses and more oversight.

For instance, Waxman blamed the Federal Reserve for failing to curb aggressive lending practices, the SEC for allowing credit rating agencies to operate under lax standards and the Treasury for opposing ”responsible oversight” of financial derivatives.

Chairman Cox had a different take on the situation. Instead of assigning blame to a particular party, he assigned blame to politicians in general. Their constant fighting allows real problems to slip through the cracks. Responsibility in Congress was not correctly divided, he asserted..

Cox claimed that the organization of Congress itself is posing a major economic problem. The committees of Congress are fractured instead of unified, working separately on issues which require similar regulation and coordination. There is the banking and financial services committees, which regulate banking, insurance and securities, and the agriculture committees, which regulate futures. Cox believes these groups need to work together. ”This jurisdictional split threatens to forever stand in the way of rationalizing the regulation of these products and markets,” Mr Cox said.

Alan Greenspan sought to eschew personal responsibility by insisting that the policies of the Federal Reserve under his leadership had 40 years of evidence to back them up. He remarked that the past has shown that financial institutions will check themselves, even if other aspects of the economy do not. He claims that no one could have seen this collapse coming that far in advance.

Lastly, Republican law makers claimed that it was not a lack of market solutions that caused the current problem, but the “mish-mash of regulations and regulators, each with too narrow a view of increasingly integrated national and global markets.”

Echoes of “Government is the problem,” seemed to resonate in the halls of Congress, and yet effective government regulation could be America’s best choice going forward.

To get a Term Life Insurance Quote or Research how to Buy Life Insurance Online visit Efinancial.com

Keynes’ Economic Theory: A Historic Solution to our Modern Crisis?

History is a great teacher.

Over 70 years ago, economist John Maynard Keynes lived through the troubles of the Great Depression and came up with a solution for such a crisis. What did Keynes’ figure out?

During the Great Depression, monetary policy became ineffective and institutional failures were triggered by falling asset prices. Keynes opposed the conventional wisdom of the time. He was not content to think that the economy would self-correct. Instead, Keynes realized that during economic downturns, people and businesses alike have a propensity to save.

In a time of financial crisis, the great irony is that saving can have a negative effect on a poor economy. When individuals save, they aren’t buying products from businesses, and businesses lose revenue. The same is true for businesses: if organizations save their money, instead of investing in new technology, materials products and labor, other companies lose revenue. It is a vicious cycle that tends to exacerbate the problems of an economic downturn.

As an economist, Keynes studied incentives in an effort to understand how to overcome the tendency to save. What he realized is that instead of attempting to keep people from saving, the government should inject money into the economy to compensate for the absence of regular investment. Thus, during recessions, Keynes recommended the government “deficit spend.” If the government worries about receiving enough revenue, he posited, then it will be highly inhibited in how it loosens capital, and therefore will not be able to stimulate the economy out of trouble.

This should be positive news for those who are worried today. Not only do we seem to have the knowledge as to how to get out of this potential recession, but the solution has already begun to be implemented. The bailout package, while it may have its flaws, represents the fundamentals of Keynes’ theory. The infusion of capital is an attempt to stimulate us out of this crisis.

To get a Term Life Insurance Quote or Research how to Buy Life Insurance Online visit Efinancial.com

The Economy as a Red Balloon

In the past week, the Dow Jones Industrial Average, one of the barometric indicators of upward or downward pressure in the American stock market, has been rising and falling like a red balloon caught in a windstorm. Many feel as tossed and tumbled as that helpless balloon, asking themselves “What’s next?” and “When will the wind change?”

According to the Chairman of the Federal Reserve, Ben Bernanke, the key is for that metaphorical balloon to settle back down to earth. “Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away.” This is promising news for mid-to-long-term investors who have held on the wind tunnel that is the US economy the past two weeks, and suggests that stock market investors might be better off keeping that long term view.

 

At the very least, bank depositors can rest assured about their savings in FDIC protected accounts The Treasury has used much of the first 250 billion dollars, endowed to it by the government bailout, to make direct investments n banks to provide necessary liquidity and reinforce financial stability.

Given the likely recovery of the economy, and the government’s historic investment in banks, why is the market fluctuating like a balloon? There is a cycle to the way the stock market tends to behave, although even that can be less than predictable. The conventional wisdom, is that people who are fearful of the economy sell their stocks. As stock price drop, the price attracts a number of new investors, which causes, in turn, a n upturn. As the world turns, and news headlines worsen about the economy, stock prices can sink again. It is a cycle that is often described as more psychological than anything else.

Do you believe that “confidence” in the economy is the single biggest issue confronting the turnaround? Are you of a mind to conserve or spend? Is our national economic drinking glass half-empty or half-full? Comments are open.

To get a Term Life Insurance Quote or Research how to Buy Life Insurance Online visit Efinancial.com

Will the Bailout Help the Economy?

Over these last several, angst-ridden days, the red hot political topic has been the financial crisis that looms large over the American landscape. The $700 billion dollar bailout authorized by Congress begs a great many questions of the American taxpayer and, so far, this “perfect financial storm” has provided precious few answers.

Will the $700 billion relief plan bridge the chasm, or does it address just the tip of a titanic iceberg? Should the American taxpayer be held responsible for Wall Street institutions or is the rescue effort a question of survival, fundamental to buttressing America’s economic foundation? Is there a stimulus to energize market confidence and is it psychological, political or financial?

The actions of the U.S. Treasury and the Federal Reserve appear on the face of it to be justifiable. The entities which the government has moved to protect have been those whose failure would trigger a chain reaction in both our domestic and the world’s global economy. As some would theorize, when a debt-fueled investment bubble bursts, financial institutions look to divest their bad debts. When every financial portfolio has the same goal, at the same time, turmoil can ensue.

Economists also calculate that the problem can only be solved if someone is willing to buy up, or pay off the debt that banks and investment companies are desperately trying to liquidate. The U.S. Treasury seems to be the ideal actor to perform this function, since it is, practically speaking, the only institution with enough buying power to handle the size of the transaction. The US government is also the only administrative body capable of organizing such a monumental effort at a systematic level.

Another looming question is the issue of regulation. Lawmakers of both parties have made it clear they do not want to give Wall Street a “blank check,” nor do legislators wish to sanction excessive amounts of money that may go end up as executive salaries or severance packages. Finally, the trillion dollar question is whether the bailout is merely a band-aid? How can the government and the fragile , fractured mortgage market protect future homeowners who see the value of their assets diminish and face default and foreclosure.

These are the hot topics that confront all of us in the days ahead. We invite your comments.

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Buy/Sell Agreements for Business Owners

Have you ever wondered what would happen to your business if one of your owner partners dies?  For example, say you are 50% owner of a business and you have 2 partners with 25% interests.  If something happens to one of those owners with a 25% interest who will you in business with?  If you haven’t done any planning the answer is you will be in business with your deceased business partner’s spouse or children.  It can be a very uncomfortable situation.

Your new associates will not have the history with the company your former associate had and will most likely want one thing.  CASH.  Since your valued partner is no longer there to produce for the company the new non-producing partner’s demand for income from a company which they partially own can be particularly difficult.

Fortunately there is an easy solution – life insurance.  You, or your business, can buy life insurance on each of the owners in an amount equal to the value of their portion of the business.  If one of the partners dies, cash will be available to buy out the deceased partners interest.  You won’t have to worry about being in business with your partners beneficiaries.  Your business partner will be pleased that their beneficiaries get needed CASH should they die.

Your companies life insurance solution should be accompanied by a legal document called a “Buy/Sell Agreement”.  A Buy and Sell Agreement is a legal document that binds the deceased owner of the company interest to sell at the agreed upon price and for the present owners to buy the interest at that price.  It’s a simple, elegant way to assure harmony in the business if one of the owners should die.  An attorney specializing in estate and business planning will be able to help draft the document.

To get a Term Life Insurance Quote or Research how to Buy Life Insurance Online visit Efinancial.com