Live Debt Free

Pay off debt. Save. Give. Live your mission.

  • Blog
  • Contact Us
  • Credit Scores
  • Spending
  • Investing
  • Earn Money

DFA Missionaries – Get Out of Debt and Serve

10.06.2010 by Matt Jabs //

Uniting to Fight Debt and Serve

Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law. Romans 13:8

Greetings all, thank you for visiting DFA.

I’m happy to be bringing a few bits of exciting news today and decided a video was the best way to share… check it out.

Acknowledgements

There are several people who deserve a shout out for their contribution in helping me reach these decisions:

  • My incredible, beautiful, and awesome wife Betsy.
  • My encouraging, loving, and beautiful mother Kathy.
  • Peter Anderson – for continued support and friendship.
  • Adam Baker – for passionately pushing me to be great.
  • Chris Guillebeau – for encouraging me to live a remarkable life.  Get the book.
  • Michael E. Gerber – for writing The E-Myth Revisited

The concept of DFA Missionaries was born from a God-given desire to unite passionate debt freedom fighters on a mission to discover, grow, and serve.

Join The Mission!


Categories // Life Missions, Video Tags // career, life, mission, video

Life Insurance: Term, Permanent, How Much?

03.22.2010 by Guest Author //

Visit the Ask Matt Jabs page and fill in the form to ask your question for free.

This questions was answered by Jeff Rose, Certified Financial Planner in Illinois who authors the blog Good Financial Cents and is the co-founder of Alliance Investment Planning Group.

Life insurance questions

DFA reader Anthony asked:

Here is a quick time line of my past year or so:

  • December 2008: My then-girlfriend, now-wife, and I purchased a house. The mortgage is $165,000.
  • April 2009: I got married.
  • December 2009: My first daughter was born.

So yes, my last year has been a very quick-pace and exciting one. But for the last couple of days, I have been thinking about my life… and life insurance. I know that I need life insurance, this is not a question of “whether or not.” The questions are: how much? what type (term vs. permanent)? should I get some through work or somewhere else? In my hunt for knowledge, I found a few things out. First, the “how much” ranges anywhere from -$200k (that’s a negative dollar value) to $1.3M. The top end ($1.3M) comes from a 20x salary rule of thumb. The -$200k comes from a fancy online life insurance calculator: It implies that my wife would be completely self-sufficient without me, and this is actually true. If I died today, she would have grief and pains and her lifestyle would change (of course!), but her income would pay all of the bills. That being the case, I have seen tons of PF bloggers talk about $1M+ policies. I definitely feel that this is overkill.

On the other hand, $50k is the minimum policy most (?) companies offer. I even walked through my numbers with a State Farm agent: According to that exercise, I would get $200k. Where do I fall in? What number should I go with? (I know that this is a personal, “comfort” level question, but I am curious about everyone else’s response.)

Second, term vs. permanent? The PF world feels that term is the way to go: You can invest the difference in premiums on your own and come out ahead. After some research, many people seem to like permanent. Then again, I could always take two policies out for one of each. What should I do?

Third, getting insurance through work or through other means? My job offers me a plan for $500k for about $11/month. That sounds great, but their insurance policy lapses when I am no longer with them, not when I die. So if I don’t die before I leave the company, it’s not worth it, despite it’s incredibly low rate. On the other hand, life insurance companies are more expensive for a smaller death benefit. However, I am covered, regardless of my job status. Also, I remain insurable if I hold any type of policy with a particular company. My thought is to max out my company’s plan, which would leave me over-insured, but it’s so darn cheap. But also, I want to start a policy elsewhere so that I can remain insurable. What do I do here? What are yours and the reader’s opinions on these questions?

How much life insurance should I purchase? 2. Should I get term or permanent insurance? Or a combination of both? 3. Should I max out my company’s plan? Should I go with a plan outside of work? Or should I do both? Thanks, Anthony.

Life insurance – What type and how much?

Anthony, deciding how much life insurance to buy can be a tough decision to make as proven through your own personal experience. There are many options and choosing the best life insurance for you and your family can be tough. First, let me say: there is no “right” answer. The many different options to weigh:term vs. permanent life insurance, 30 year vs. 20 year, third party vs. employer, are all a moot point. The fact of the matter is: get some sort of life insurance to make sure your family is taken care of.

I recommend term life insurance

Personally, I’m a HUGE fan and consider term life insurance the best choice for many situations. That’s the way I go and that’s the way I recommend to my clients. Whether you purchase $500,000 of term life or $1,000,000, what you pay per month/year on the premium is trivial compared to the benefit to your family in case of your unexpected passing. It’s just too simple of fact, term life insurance is cheap to buy.

As I read over your situation, I could relate as I went through the same process. When I first married, I bought a $250,000 30 term policy. After we had our 1st child (about 2 years later), I added an additional $500,000. Recently, we just built our first home, had had our second child and; with me just turning 32 (ouch,) I didn’t want to take the chance of having go through another life insurance medical exam and run the risk of being denied or have my premiums shoot weigh up. I opted to tack on another $1 million term policy.

Here are a few of the things I based my decision on:

You can take a look at a post I did, how much term life insurance do you need to buy, that uses the same rule of thumb that you found (20x your salary) or is based on a needs analysis. The needs analysis main focus is to provide an income replacement for your spouse while you’re gone, not just to pay off any current debt or funeral expenses.

The logic I used in my amount was that I wanted my wife to have at least an $80,000 per year income if something happened to me. Based on a conservative number of earning say 5% on the money and if invested, that should do just that. Is $80,000 a year excessive? A single mom raising two kids that needs to last her the rest of her lifetime- I would say not. Plus, the premiums are extremely affordable.

If you want to take out some permanent life insurance to give you some peace of mind, then go for it. At your age, I wouldn’t necessarily advise it. Here’s a look another look at what is better, permanent vs. term life insurance.

Company insurance plan – Should you max it out?

Your company’s plan is an option, but I wouldn’t have it be your main focus. What if you lose your job? What if your company goes belly up? What happens if this happens when your 45 and forced to get life insurance when you’re older. By going through an outside carrier, you’ll never have to worry about it.

To play devil’s advocate to myself, $11/mo for $500,000 is cheap. I’m pretty confident though you could find an outside carrier that would offer something equivalent.

Remember: Be sure to shop around! You would be amazed at the difference that one insurance company will charge over another.

As usual, be sure to review your insurance needs on a periodic basis. $1.3m might seem like a lot of life insurance today, but five years for now it might not be enough. That’s exactly what I thought when I had $750,000.

Matt’s note: Anthony, I agree with Jeff.  For our family we also carry term life and believe it to be the best option by far.  I carry more insurance on my wife than on myself and make sure her coverage is commensurate with how well I want her to be taken care of in the event of my death.

*Investors should carefully consider the charges and fees associated with a new insurance policy as well as any costs associated with surrendering the current policy.

*Jeff Rose is a registered with and Securities offered through LPL Financial, Member FINRA/SIPC.

*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what may be appropriate for you, please consult your financial advisor or local insurance agent.

Categories // Insurance Tags // Insurance, life, permanent, term

How Much Money is Your Life Energy Worth?

02.26.2010 by Robert Espe //

Today I visited The Death Clock – a website that estimates how much life we have left.  After giving it my gender, age, height, weight, and smoking status, it informed me that I have about 1.5 billion seconds left.  Try it; it is rather sobering, even if it lacks precision.

What does this have to do with personal finance?  Well… very much because it helps reveal how I think of money.

Defining Money

Money is rather dryly defined as, “a medium of exchange for the payment of debts.” To some, money is power.  To others it is a comfort or a source of security.  It has taken the form of precious metals, paper, and digital numbers in electronic accounts.  However, the best definition of money I have ever heard, and the reason for including a link to death clock is this:

“Money is something for which you trade your life energy.”

Think about it.  The majority of us get money by giving up part of our lives. You get up early, you spend time away from your family, you earn by the sweat of your brow, and the whole time your death clock is ticking down.  When you are young, and have energy to spare, it is wise to convert some of this excess into money, for as you age you have less energy to spare.  The unfortunate part is that it is a conversion, not a storehouse.  Life, once traded for money, cannot be changed back if you discover you have more than you need.  Our goal then should be to strike a balance: to convert sufficient life energy into the money needed for an enjoyable life, but as much as is possible, to spend our lives actually living.

Counting the Cost

In order to apply this principle, you first calculate your real hourly wage.  You will then see exactly how much your life energy is worth, and you will be able to measure the cost of money spent in terms of valuable life energy lost, instead of just dollars.  I find this is helpful when trying to learn to live more frugally.

Back in my article on using time well I blocked out how I spend my time.  I spend so many hours at work each week, but also spend a lot of time preparing for work and commuting… for which I am not paid.  Since my life energy is draining away during this time, it only makes sense to include that time in my workday.  A little division, and I have my real hourly wage.  Use this handy calculator to discover yours (it includes other variables that can be factored in.)

Once you have finished, you can do some eye-opening conversions.  For example:

How much life energy do you spend at convenience stores/restaurants daily?  Could you spend less and still be happy if you made your coffee and lunches at home?

How much life energy will it cost if you buy that new toy you are thinking about getting?  Is it something you know you will use, or are you simply shopping for the thrill of something new?

Matt has written several times about how much debt costs that also illustrate my point beautifully.  With your real hourly wage, you can now see how fast your debt is literally draining you of your life energy.  That knowledge should provide you with the strength to run from debt with gazelle intensity.

This is not to say that you should never spend money, but rather to find the point at which spending more brings no additional joy, then learn to say… “I have enough.”  It is impossible to truly enjoy financial success if you believe you still need, “just a bit more.”  This idea of a finish line will help protect us from spending so much of our lives accumulating things… things that we may not have enough life left to enjoy!

Try it yourself

First, go try out the DeathClock Calculator.  Then check out the real wage calculator to get your own numbers.  Then, next time you spend money ask yourself how many hours this purchase is costing you, and most importantly, if it is really worth it.  Then come back here and tell us about it.

Categories // General Tags // death, life, money, time

Popular Posts

  • Understanding & Improving your Cash Flow
  • Credit Card Debt Reduction Handbook
  • Our Monthly Debt Reduction and Savings Statements
  • Pay off Credit Cards VS Build Emergency Fund Savings - Me VS Suze Orman
  • Credit Cards - Close 'em Shred 'em & Forget 'em!
  • More Reasons to Pay Off Credit Card Debt
  • Wise Use of Paid off Credit Cards? You Decide.
  • The Whole Armor of Personal Finance
  • One World Currency - New World Order
  • Debt Testimonials - Encouraging Success Stories!

Disclaimer

Content on Debt Free Adventure is for entertainment purposes only. Rates & offers from advertisers shown on this website may change without notice: please visit referenced sites for current information. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. We respect your privacy. Privacy policy.

Popular Posts

  • Lending Club - My Review of Social Lending
  • Understanding & Improving your Cash Flow
  • Credit Card Debt Reduction Handbook
  • Our Monthly Debt Reduction and Savings Statements
  • Pay off Credit Cards VS Build Emergency Fund Savings - Me VS Suze Orman
  • Credit Cards - Close 'em Shred 'em & Forget 'em!
  • More Reasons to Pay Off Credit Card Debt
  • Wise Use of Paid off Credit Cards? You Decide.
  • The Whole Armor of Personal Finance
  • One World Currency - New World Order
  • Debt Testimonials - Encouraging Success Stories!

Disclaimer

Content on Debt Free Adventure is for entertainment purposes only. Rates & offers from advertisers shown on this website may change without notice: please visit referenced sites for current information. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. We respect your privacy. Privacy policy.

Copyright © 2023 · Modern Studio Pro on Genesis Framework · WordPress · Log in