Beating Broke

Personal Finance from the Broke Perspective

The Life Insurance Movement

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Much like the Roth IRA movement that I participated in a while back, Jeff from Good Financial Cents is spearheading a Life Insurance movement today.  The movement is designed to help educate people on the different types of life insurance, the ways to go about getting life insurance, and on how life insurance works, in general.

I’m sure we’ll see lots and lots of excellent articles to help educate the community.  If you want to check them out, Jeff has compiled a list of all the participants and posted them on the Life Insurance Movement homepage.

Where do I stand on life insurance?

I used to be on the fence.  On the one hand, there is a very strong argument for it.  On the other hand, it can be pretty draining on your finances, for something you don’t use (hopefully).

For a young person, struggling with debt and bills, that extra $50-$60 a month to cover my wife and I is a not insignificant chunk of money.  Neither of us is very old, and our probability of dying is pretty small.  So, why spend that money on something that we have no plan on using when it could just as easily go towards paying off some bill?  Maybe when we’re older, we thought, we’ll get ourselves some life insurance.  You know, when we can “afford” it.  I know there are quite a few of you out there who agree with that statement.

But, here’s the thing.  I buy car insurance to help pay for damages to my car should I get in an accident.  I’ve used that car insurance.  My wife and I are good drivers, and neither of us has been in an accident that has been directly our fault.  The few accidents we have been in have always been someone else’s fault.  We had very little control over whether we got into that accident or not.

Life insurance isn’t all that much unlike car insurance.  If car insurance only paid out if you were at fault in the accident, I’d never buy it.  After all, I have never been in an accident that was my fault.  Likewise, if life insurance only paid out if you died of natural causes, it wouldn’t make much sense, statistically, to purchase any before you were at least 45 years old.  But, we all know that people don’t just die of natural causes.  They die in all manner of accidents too.  And those accidents don’t just happen to people of a certain age.  So, it’s really the accidental, not-your-fault sort of death that you are insuring against.  And you have no control over that.  And, should you die as a result of one of those accidents, will your spouse and family be able to pay the bills?  Or, will they be forced to sell the house to pay for the funeral?  Do you really want them to have to make that decision if you die?

What kind of Life Insurance should I get?

There are basically two kinds of life insurance.  Term life, and whole life.  The difference is in how long the term of the insurance is, and how much the premiums are for the coverage level.  A whole life insurance policy is good for your whole life.  Because it’s good for your whole life, the premiums are usually higher for the coverages.  A term life insurance policy is only good for a set term.  It might be a 10-year term life policy, and be valid for 10 years from the purchase date.  At the end of the 10 years, you have to purchase a new plan.  When you are young, the term life policies have much cheaper premiums because, statistically, you aren’t very likely to die young, and so, the chances of having to pay out on the plan is pretty small.  When you renew after the 10 years, the new plan would be based on your age at the time, and would be slightly more expensive because of a higher probability of death.

I can’t really tell you which is the best for you, though.  It’s something that you, and maybe a good financial planner, should look very hard at.  You need to educate yourself on the different types too!  Really do your research, and don’t be misled by Colonial Penn’s “affordable” insurance, for example, look for a reputable life insurance company, that offers everything you and your family might need. I encourage you to click that link above, take a look at all the articles that are part of the life insurance movement, and find out as much as you can about life insurance.  Being educated on the subject will make it easier for you to spot bad policies, and find one that will fit your financial needs.

How much life insurance do I need?

Clearly, we’d all like to have a life insurance policy of several million dollars.  Some amount that would set our family up to never have to worry about money again should we die.  In reality, that just isn’t usually possible.  As the amount of the policy goes up, so do the premiums you pay to keep the policy.  What you really want is a policy that will pay out enough to make the transition from a two person led household, to a one person led household.

  • If you’re single, a policy that would pay off your debt, and pay for the funeral is likely enough.
  • If you’re married, with no children, a policy that can pay off the debt, the funeral, and replace your salary for a couple of years is a good policy.
  • If you’re married, with children, a policy that can pay off the debt, the funeral, and replace 5-10 years of your salary with some left over is an excellent idea.

Obviously, all of that is partially determined by what size policy you can afford.  By “afford”, I don’t mean afford in the way you likely do.  I don’t mean, after you’ve eaten out several times in the month, how much money is left over to buy life insurance.  I mean, it should be included in your budget, just like car insurance, your mortgage, and your utility bills.  When all of that, plus your life insurance premium is paid, you still need to be able to keep your bills current, and buy food to stock the refrigerator.  That kind of “afford”.

In the end, when you go and read all the other articles that are part of the life insurance movement, you’ll likely find several viewpoints that clash with mine.  You’ll find people who think that whole life insurance is better than term life insurance.  You’ll even find people who don’t think you need life insurance at all.  I think the important part is that you think about life insurance, learn about life insurance, and then make the decision yourself (preferably with help) on whether you want life insurance, what kind of life insurance you want, and how much you want the policy to be.

Tip: Check with your employer.  Some companies are offering life insurance to their employees.

For me, I think that life insurance of some sort should be mandatory, just like car insurance.  There should be state required minimums that you have to carry.  Far too many people are leaving behind families without any sort of coverage at all.  Even if it’s a small policy that can cover funeral expenses, that’s better than nothing at all, and you can increase it later too!

Trade DVDs to Save Money

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Why buy anything if you can trade for it?  DVDs aren’t an exception.  I’ve been using a service called Swap-a-DVD to trade DVDs for a while now.  It’s actually a sister site of the site I use to trade books, paperbackswap.  (If I really wanted to, the credits are exchangeable between the two sites.)

The premise is pretty simple.  You list the DVDs that you’re willing to trade away, and create a wish list of the DVDs that you would like to see.  Other users request the ones you want to trade off, you ship them to the user, and then receive a credit for the DVD once it’s marked as received.  Once you have credits, you can then order DVDs for yourself, either off of your wish list when they become available, or by finding DVDs that are already available.  Watch that one a few times, then list it to trade away, and you can cycle through them that way.

The only cost is the shipping to send the DVD off for credit.  Usually, it figures out to be about $2.50 a DVD.  Less than you can rent the DVD for from most places.  Most older titles are really easy to come by, with most of the new releases having some pretty long wait lists, but if you’re willing to wait to see the newer movies, you just add them to the wish list, and you’re added to the queue.  As soon as you reach the top of the queue, the next one added is yours!

We’ve used it pretty extensively to get movies for the kids.  Ones we either can’t find to purchase or rent, or ones we’d like to hold onto for a while so the kids can watch them repeatedly as they usually do.  (We’ve seen Cars about 400 times…  I wish I was kidding. It was the only movie our son would watch for close to two years)  The downside, for us, is that the kids can be somewhat rough on DVDs and they get pretty scratched and we’ve had quite a few of them that were untradeable, if not unusable entirely, by the time they got tired of the movie.

But, if you’ve got slightly older kids that are a little easier on DVDs, it could work out really well.  And it works out really well for the movies that us adults like to watch too.

What other ways do you save on watching movies?

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So, Your Child Wants to Be an Olympic Athlete

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Years ago, I worked with a woman I’ll call Janet who had sat down to watch the Olympics with her then 6 year old daughter.  Her daughter was glued to the television watching the women gymnasts, and when the Olympics were over, she declared she, too, wanted to be an Olympic gymnast.  Like any good mother, Janet enrolled her daughter in gymnastics, not expecting much but a way for her daughter to pass the time and learn a new skill.

When I knew Janet six years after that, her daughter was taking gymnastic classes several hours a day, in the early morning and after school, and Janet, who had been a homemaker, took on two part-time jobs to help support her child’s dream.

img credit: eviltomthai on Flickr

Every two years when the Olympics come around, children watch and decide that they, too, want to be Olympic athletes.  As you watch the Olympics, here are a few things to keep in mind if your child decides to start a new sport.

  1. Start slowly.  There is no need to run out and sign your child up with the best coach.  Start at the local level, which will be much cheaper.  Maybe your local community center offers classes.  Start your child there.   If she does end up loving her newfound sport, then consider moving her to more rigorous courses at a location specializing in her sport.
  2. Keep her well rounded.  Don’t let your child focus solely on one sport too early in her life.  Olympic medal winner Michael Phelps began swimming at age 7 as a way to deal with his attention-deficit hyperactivity disorder.  He was involved in many other sports until age 11 when his coach told him he had the potential to qualify for the next Olympic games.
  3. Don’t take on more than your family finances can handle.  While every parent wants to help their children pursue their dreams, don’t take on more than your family can handle.  If you focus on one child’s Olympic dreams, your time with your other children can suffer.  Also, keep in mind that very few athletes who train to be Olympians actually make it to the games, and even fewer win medals.  I often think of Janet and her family’s sacrifice and wonder about the pressure it must have put on her daughter to perform and excel.
  4. Make sure the dream is your child’s, not yours.  Television is permeated with parents who are pushing their children and trying to live vicariously through them.  Dance Moms and Toddlers & Tiaras come to mind.  Make sure that you are not one of those parents.  Your child should have the right to quit if she wants to as well as to pursue her dream, if it is her dream.

Many children love watching the Olympics, and often it sparks an interest in many young children to start a sport.  Encourage his need to explore extracurricular activities, but don’t feel the need to have him train several hours a day and begin to dream he is the next Michael Phelps.