How Much Life Insurance Do You Need?

Does it seem like the cost of a postage stamp just went up? That’s because it did: Last year, the Postal Service last increased the price of a first-class stamp to 44 cents, up from 42 cents in 2009. Yesterday the Postal Service met to discuss a new rate increase and they have agreed that it’s time to increase rates once again. Technically, the law prohibits a price increase that’s greater than the rate of inflation, which for the last year has been 0.9 percent. But under “unusual circumstances,” the Postal Service can sidestep the law and increase postage rates by more, which is what they plan on doing.

Why is the post office increasing rates greater than the rate of inflation? “The Postal Service faces a serious risk of financial insolvency,” postal vice president Stephen M. Kearney said. The post office lost $3.8 billion last year, despite cutting 40,000 full-time positions and making other reductions, and Kearney said it is facing a $7 billion loss for this year and the same for fiscal 2011, which begins in October. The rate increase would bring in $2.5 billion, meaning there still would be a large loss for next year.

How Much and When Rates Will Increase

The most noticeable increase will be the first-class stamp with another 2 cent increase to 46 cents. That’s about a 5% increase. While your average letter will be going up a few cents, everything else is increasing as well. Priority mail, express mail, addtional first class postage, media mail, and so on. Across the board, most services will see about a 5% increase. One noticeable increase comes to the mailing of periodicals. Those mailings are slated to see a whopping 8% increase. The new rates still need to be approved, but with almost certainty they will be, and then the new rates will take effect on January 2, 2011.

How This Will Affect You

I know what you’re thinking. You don’t send letters and use email instead, you pay all of your bills online, and the increase won’t really matter to you. It’s true that an extra two cents for a stamp isn’t going to break the bank for most people who only mail a handful of items a year, but these postage increases don’t stop there and even if you don’t mail anything these days you may still feel the pinch.

Think about the companies that rely on the postal service to ship their products to consumers. What does a 5% increase in postage mean to a company that already spends tens of millions of dollars a year on postage? Amazon, anyone? An even bigger player has to be Netflix. Their core business model resolves around sending you movies in the mail. In fact, media mail, which Netflix mailings fall under, is slated to get a 7% increase. This would end up costing Netflix upwards of $50 million more on shipping costs in 2011. That’s on top of the already hundreds of millions being spent on shipping.

So, while you may not fret over the two extra pennies you need to stick on an envelope, don’t expect companies who rely on the post office for shipping to just eat the cost. Instead, it will likely get passed down to you in some form or another.

The Forever Stamp

Finally, the one bright spot is that forever stamps are still being sold and that means you can still effectively lock in the lower first class postage rates. A lot of people ask whether or not the forever stamp is a good investment. Well, considering you can essentially get a 5% return on your money in a year, yes, on paper it’s a good investment. But you have to look at how much you really stand to make. For example, if you use 50 stamps a year, the 2 cent savings is one dollar a year. It’s still about a 5% return on your investment, but in the end it’s still only a dollar. So, you have to ask yourself whether or not it’s worth it to stock up on forever stamps just to save what could be a matter of a dollar or two in the coming few years.

In my opinion, it’s a good idea to buy a healthy supply that will last a year or so, but I’m more concerned about the savings I see by not having to go to the post office as frequently. As far as I’m concerned, the amount of time I save by not having to go into a post office is priceless. I don’t really care about saving a few cents on postage, but I do care about not wasting a half hour of my time standing in line at an understaffed post office.

Are you tired of the same boring scenery?  Do you want to make a difference in the world and travel at the same time?  Have you ever heard of a Volunteer Vacation?  If you haven’t, you are not alone.  Many people are unaware of the vast amount of opportunities made available to them through organizations like the Pacific Crest Trail Association and the United States Lighthouse Society.  What could be more fun than traveling a distance to help others in need?

Instead of spending ridiculous amounts of cash to stay in overpriced hotels and participate in run-of-the-mill sightseeing, why not explore the possibility of being a Light House Keeper or help care for the trails in your favorite National Park?  Not only will it do you a world of good to spend your summer doing something useful, it will get you out of your house and into locations that even the most seasoned traveler dreams of.

Pam Grout, author of The 100 Best Volunteer Vacations to Enrich Your Life, has created a handy reference guide for those individuals wanting to lend a helping hand but that are unsure of where to start.  Each listing has a description of the type of work available through each volunteer opportunity, a summary of costs, and the contact information of the group, institute or organization organizing the trip.  Not only will this book spark your interest, chances are, it will give you a serious case of wanderlust.

Websites like the American Hiking Society and the Gesundheit! Institute provides volunteers with ample opportunities to uplift someone’s spirit and leave the world in a better state than what they found it in.  You can find out more about program requirements and restrictions by visiting these websites or contacting the Volunteer Coordinator by email.

Other places worth looking into include:

• The Earthwatch Institute.  Scientific expeditions that include projects on ecology, zoology and archaeology
• Habitat for Humanity.  Building projects in numerous countries that help people obtain affordable housing.
• Rustic Volunteer and Travel.  Opportunities to complete projects in China, India, Nepal, Uganda, Argentina, Peru, etc.

No matter what time period you are looking at, there is a Volunteer Vacation opportunity available.  Some programs last a few days while others last a few months.  Some provide meals and accommodations at no cost to you while others charge a menial participation fee.  Whatever way you look at it, it is money well spent.  In addition to changing your life, you have the opportunity to change those around you with a simple act of selflessness and kindness.

If you’re interested in a volunteer vacation you may also be interested in caretaking as another option for traveling, vacations, or even as a career option.

Charissa Arsaoui is a freelance writer for ChickSpeak, Buzzine, DisFUNKshion Magazine, Student Stuff, and a guest contributor for Wisebread.  She loves thrift related topics and can spot a bargain a mile away.

You may have heard from various sources this week that Hulu is going to start charging a monthly fee to access some of their premium content. We knew this was coming eventually, but now that it has been officially announced it has people talking. Hulu has been a staple for those who wanted to ditch their expensive cable or satellite bill, but it looks like the free ride could be coming to an end.

Hulu Plus costs $9.99/month and is supposed to open up a lot of older content for past seasons of popular TV shows. Hulu already offers the trailing five episodes of current shows, but now if you want to go back even further you can if you buy a Hulu Plus subscription.

From the Hulu blog:

As a Hulu Plus subscriber, you’ll now also have access to back seasons or full runs of some of TV’s greatest shows. All nine seasons of The X-Files. All three seasons of Arrested Development. Ten seasons of Law and Order: SVU. All five seasons of Ally McBeal. Seven seasons of Buffy the Vampire Slayer, and three seasons of Roswell. Every episode ever of Grey’s Anatomy and Desperate Housewives. Classic skits from the first five and most recent five seasons of Saturday Night Live. The list goes on. This is all on top of hundreds of shows already on Hulu.com today. It’s a treasure chest in the cloud for TV lovers.

If you’re a big fan of some of these shows and want access to old seasons you may have missed or forgot about, that is probably a pretty good value. Of course, you can already do this with a subscription to Netflix or possibly even via on demand features with your cable provider, but with the new Hulu Plus you have many more places to watch your content. No longer are you bound to your computer. Fire up that new iPhone and catch a show on the go or even use that new Blu Ray player to stream the content right to your TV.

Is Hulu Plus Worth It?

This is the big question. Is it worth paying another $10 a month just to have access to more TV content? I guess that all depends on your TV usage. I don’t see that many people rushing out for a subscription just to watch past seasons of the shows they’ve already seen, but maybe that’s just me. I suppose if you can get by without a cable or satellite TV subscription and rely on something like Netflix and Hulu combined for all your viewing needs it would be a pretty decent savings.

Personally, as much as I love Hulu, I don’t see any need in subscribing to the Plus service. Sure, it would be nice to fire up an old favorite episode of Family Guy any time I want, but that alone isn’t enough to make me want to spend an extra 10 bucks a month. For me, having cable with on demand, Netflix, and a TV card in my computer operating as another DVR I already have access to more TV than I could ever use, so I’ll just sit this one out.

The Future of Free TV

Even though this simple $10 subscription is just a small addition to the otherwise large free TV universe, I’m afraid it’s just the first of many steps that will be taken in coming years to lock down free TV to a point where you’ll almost have to buy a subscription to something just to watch what you want. It’s only $10 now for old content, but before long I assume you’ll have to pay a little more to get the newest episodes. Then if you want to watch live sports you’ll have to pay for another package, and movies will of course be yet another. Will streaming TV from the web ever be the same?

It will likely end up just like cable is today and by the time you pay for everything you want to watch, the way you want to watch it, you’ll be dropping $40 or $50 a month just to get your TV content online. Hopefully I’m wrong, but that seems like the only logical progression as more people want to watch their TV online and anywhere.

So, what do you think? Will you be signing up for Hulu Plus? Do you think this is just the beginning of a slippery slope where we have to start paying for even more online content separately?

I receive a number of emails each week from readers and I try to answer all of them the best I can, but occasionally I get questions from multiple people that ask the same thing. In those situations I like to address the question as a post which can hopefully help others who probably have the same question but just haven’t asked.

That’s what I’m going to do today. Many of the questions in recent months have been some form of:

I’m still relatively young and actively saving for retirement primarily in stocks, but the last few years have been rough. I’ve lost thousands of dollars and it hurts to see my money continuing to decline or remain flat. I’m concerned that the market may never recover and I’ve considered taking my money out of the market completely and investing it somewhere safe such as bonds, CDs, or gold. What do you think?

Understand Your True Time Horizon

So, should you get out of the market? That’s the million dollar question, but the answer is usually a resounding: no. For the majority of people writing in they are in their 30s. That means they probably have another thirty years before even thinking about relying on that money, and another few decades beyond that to make it last. That gives us about a 50-year time line to work with, which a lot of people forget about. Think about what can happen over this time span.

Just look back to see where we were about 50 years ago:

• The interstate highways you drive on every day did not exist. Construction on the first highways did not begin until 1956.
• Alaska and Hawaii were not even states until 1959.
• The first domestic jet service didn’t start until late 1958.
• Martin Luther King Jr. had a dream in 1963.
• There was no such thing as the Internet or cell phones.
• The introduction of color television was a technological marvel.
• In 1960 the DJIA hit a high of 685. $10,000 invested at that price would be worth nearly $150,000, not including dividends, today.

Put things into perspective and look at how much the world has changed. In fact, just look back ten years when nobody knew what HDTV was, when you were probably surfing the web with a dial-up modem, and using a bulky cell phone with just a one color LED display. And when you go back 40 or 50 years it’s a shocking reminder how far we’ve come. So, ask yourself this: if your investments are something that you plan on using many decades from now, is it wise to make a drastic decision today based on just a few short years of bad performance?

Before you do anything, first take a realistic look at when you plan on using those invested funds. While nobody can predict the future, it’s safe to say that two bad years will likely be just a small blip on the radar over the next 40 or 50 years and making rash decisions without thinking about the future may do more harm than the poor investment performance itself.

Dollar Cost Averaging

Most investors save for retirement by taking a small amount of money and invest it regularly over time. Either through 401(k) contributions or periodic IRA deposits, chances are you’re regularly putting money into the market. This is a good thing because  provided you didn’t stop making contributions after the market started to fall it means you’re investing in stocks even when prices are low. And how do you make money? That’s right. Buying low and selling high.

If you’ve been continuing to make those regular, periodic investments over the last couple years while the market has declined, you have been getting more shares for your money as you buy low. Granted, the money you already had invested has also gone done and makes your performance look bad, but all of that money you’ve invested while prices are lower will see even larger gains as the market finally turns around, provided you don’t sell them off before they have a chance to do so.

So, before getting the urge to bail out of the market be sure to look at what you’ve been contributing while the market is down. It’s hard to see value right now, but the longer the market stays down and the more money you put into it at those levels, the greater the reward when the market does recover. Think of it this way. Don’t you wish you could have invested a bunch of money back in 1995 so you could sell in 2000? Or invest a bunch back in 2003 so you could sell in early 2008? We all do, but since timing the market is risky and nearly impossible to do successfully, the next best thing is to continually invest so you are at least investing some money when the market is down so it can take part in the next bull run.

The Myth About Safe Investments

Finally, to tackle the last part of the question I want to address the myth about safe investments. When people consider bailing out of the market they often talk about moving into something “safe” such as bonds, CDs, or gold. There’s no such thing as a truly safe investment. FDIC insurance aside, everything carries risk. It’s just a different kind of risk compared to market risk.

The biggest misconception people have is that if they get rid of stocks in favor for bonds they are now protecting their money and they can’t lose anything. It’s true that if you invest in safe bonds or bond funds such as government bonds, there’s little chance you’re going to lose money over the long run. What you give up for this relative safety is earning potential. Typically, the safer the investment, the lower the returns. So, you may sleep a little easier, but if the market decides to rally after you bailed out to government bonds now run the risk of losing out on those gains. And of course, there are many other bonds and bond funds that don’t have the full faith and credit of the U.S. government behind them and it is a very real possibility to lose money betting on bonds. Even if you aren’t losing your principal, you need to factor in taxes and inflation. In the end, bonds will often do little more than keep pace with inflation over the long run. The risk with that is you really didn’t allow your money to grow and now you could be faced with not having enough money to retire on.

Then you have investments like commodities. Gold in particular. TV commercials would lead you to believe gold is as good as it gets. It’s a real asset, it’s an inflation hedge, and since it’s at record high prices it’s the best time to be investing in this sure thing. Well, deciding whether you should be investing in gold or not is up to you, but it’s far riskier than you might think. While having some commodities like gold in your portfolio can be good for the sake of diversification, it is in no way a single safer alternative to the stock market. Putting everything you have in gold is about as smart as putting everything into a single company’s stock. Things go right and you’re significantly rewarded. Things go wrong and you’re left with a devastated nest egg.

Since it’s nearly impossible to time the market or know what the next hot investment will be, the best thing you can do is assess your diversification strategy. Having a proper mix of investments, especially those with low correlation, can go a long way in making sure you minimize your losses in bear markets while still taking advantage of bull markets. Jumping entirely in and out of stocks based on short-term performance is riskier than the market itself and you often end up just selling low and buying high.

Should You Get Out of Stocks or Not?

Finally, the answer to the original question after a long-winded response. Ultimately, there isn’t an answer that’s right for everyone, but for most people and in most situations, the idea of bailing out of the market completely, especially at this point, is probably a bad idea. Sure, we don’t know what is in store for the next few years, how the economy will fare, or what the future holds, but you should take into consideration all of the issues above before making that decision. Look at your true investment time frame, remember the benefits of dollar cost averaging even if you don’t see anything positive right now, and remember there’s no silver bullet out there.

When you look at the big picture you’ll probably come to the realization that it isn’t the best idea to bail out of the market. You may still make changes to your portfolio, adjust how much you’re investing right now, or even change your strategy a bit, but the all or nothing approach of being in or out of stocks isn’t typically the right way to think about it.