Spend Now, Save Later
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There are lots of reasons that being frugal is awesome. We’ve talked about six of them in this blog post. Among those six reasons is the ability to (hopefully someday) retire. It’s easy, though, to get caught up in the “no spending on anything I don’t need for my literal survival” and forget that there are some things that are important, though maybe not literally necessary for your survival. Still, sometimes you’ve got to spend now in order to (hopefully) save tomorrow. Here are a few:
Life insurance feels like a frivolous purchase. You’re healthy, you’re invincible, you’ve saved up a significant nest egg for emergencies. You don’t need life insurance because nothing bad is going to happen, right? Wrong!
According to SILI’s guide to life insurance, there are only a few people who truly don’t need life insurance: single people with no dependents or family, and those with grown children who are 100% financially independent. For everybody else, life insurance is really important. Life insurance is what protects your family if something happens to you and it’s especially important if you are your family’s only source of income.
You can also set up your life insurance policy to cover a business you’ve started and any partners who have become dependent upon your input and income to keep the company solvent. This is especially interesting to us, because we’re committed to freelance enterprise full-time.
Unlike car (and now health) insurance, it is not against the law to decide against having homeowner’s insurance. It’s true that many lenders will require you to have a homeowner’s insurance policy in place before they’ll allow you to take out a mortgage, but once you’ve got your new house and are moved in, there isn’t a law that keeps you from canceling your policy.
But you shouldn’t, because here’s the thing: homeowner’s insurance doesn’t just protect you if something goes wrong with the structural integrity of your house. It protects you against theft and any litigation-happy person who might trip while walking down your front steps or on the sidewalk in front of your house. That doesn’t mean you have to pay through the nose for it. The Wall Street Journal put together a quick guide to making sure you’re covered without having to take on third or fourth jobs to afford it.
Insurance is, on its face, baffling. You’re literally throwing money at a company and hoping like heck that they’ll never have to use it to take care of you. Still, it is better to pay money now than to put your family into serious financial strain later if there is an emergency. Work with a broker to help reduce the costs you pay out of pocket for your premiums every month and make sure you shop around. There are lots of ways to save money on your insurance policies. You just have to look for them!
How much do you pay for life insurance and homeowner’s? What are your favorite ways to save?
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I agree with this 100%, and would add medical insurance to the list as well. Although I guess I don’t have to since it’s required by law now, but you get the point. The costs involved with not having health insurance could be quite substantial.
I also include Long Term Care (LTC) Insurance in my core budget. And that’s what LTC means to me: LONG TERM insurance against a health catastrophe that would otherwise either (1) wipe me out financially AFTER being done with the hospital, or (2) leave me at the tender mercies of some minimum-effort, barracks-style “facility.” The peace of mind is worth the $172 a month to me. And I can still fit it within my $18,000 annual core budget.
With no dependents and no home I don’t have either, but I do spend on quality food to maintain my health.
We added on an “umbrella insurance” policy for general liability. It was seriously around $150 per year for $1 million worth of annual coverage, which is hard to beat. The chance that we’ll ever need this is slim, but this will save us from someone taking all of our assets in a legal suit, etc. if something bad ever did happen (car accident, someone getting hurt at our house).
Also, if you have children, especially if you have significant life insurance policies, I would strongly suggest getting a will and trust agreement setup. We signed up for “prepaid legal” through our work benefits and it cost ~$120 per year and for that we were able to get an estate lawyer prepare our will & trusts for free!
I’d even argue for a little bit of life insurance for single people with no dependents. If something happens to you, someone has to pay for the funeral and any other stuff that may happen. I had insurance when I was single because I didn’t think it was fair for my parents to get stuck footing that bill.
The supreme use of life insurance, or what I refer to as investment grade life insurance, is for privatized banking, The Infinite Banking Concept. You can use investment grade life insurance to get out of debt and stay out of debt to lending institutions. When you need to borrow money, you borrow from yourself and pay it back with interest. You recapture your principal and interest allowing you to build wealth. Your bank is an asset that grows tax free for life guaranteed. Your bank will pay you a tax free income for life when you retire. You can borrow from it for anything…cars, boats, college for the kids, business ventures, real estate, vacations, whatever. 34% of what you make in your life time goes to interest on debt. Keep that money and use it to build wealth. If you buy expensive items cash, you just gave up the opportunity for that money to earn interest for life. So use your own family bank, my friends. Borrow from your own bank, pay back the loan with interest, and grow your wealth more and more, tax free. This can be done with the money already in your budget. Get out of debt and have a pile of cash in your bank when you’re done. When you die, pass on a tax free legacy to your heirs. Go to my website to learn more. Call me for guidance.
I appreciate your emphasis on living a financially responsible life. Infinite Banking is the best thing you can do for yourself financially. I promise you.
Where I live, spending on insurance is usually considered a waste of time bit perhaps that’s because the policy deals here aren’t that well developed. Everyone loves saving, though.And large companies insure their workers so I guess nobody is really bothers with the idea.
I have 250k in individual term life insurance, and it costs me less than $50 per month. That covers the mortgage and leaves another 80k free or so. Through work I have another 50k. I think my parents have a small policy from when I was a child that is about 10k… Enough for a funeral. Should something happen to me, my fiancé would get a paid off house and around 130k to sort out his life going down to a single income. If/when we have children, this will have to be rethought because they are expensive and would require larger amounts to subsidize a single income.
I need to get life insurance. However its overwhelming to me. With Emmett’s birth in July, I changed from not needing it to now needing it.
We have all kinds of insurance: life, medical, homeowner’s, disability, and liability umbrella. We are thankful that we have all of it; it helps us sleep better at night knowing that if some unthinkable event were to happen, we have contingencies in place that will help take care of the costs of those things.
We have life and home owners. I couldn’t imagine if my house wasn’t insured – I’d never feel secure. We don’t pay that much, maybe $80/month for home and our life insurance is nice and cheap. It’s good to be insured.