If you are looking for Erin’s regular Wednesday post, it will appear on Friday this week.
There are many things you can do to improve your finances, such as starting to invest, but today I want to focus on just 1 thing you need to do to improve your finances in 2015.
You need to protect your future earnings.
If you’re in your 20s or 30s your biggest asset is your future earnings. While early retirement is a sexy topic that a number of people idolize, the reality is that most people will work into their late 50s or even well into their 60s. When you’re in your 20s or 30s, the future earnings you will make will almost certainly tower over any assets you have today.
The reason you need to protect your future earnings is because life is unpredictable. Once you are married and/or have children who depend on you, it’s important to protect your future earnings because you aren’t the only one depending on those earnings. Even more important if your husband or wife quit their job to be a stay-at-home parent.
The Danger of thinking you don’t need Life Insurance
Some people are proud of the fact they don’t have life insurance because they think their spouse will be just fine if they pass away prematurely. They may have a small amount of money in the bank and perhaps even some investments. Even so, your spouse is capable, right? They are strong and will be able to “figure it out” if you pass away prematurely.
I think this is an ignorant statement for two reasons: 1) you can’t predict the future and 2) you can’t predict the impact your premature death will have on a spouse. You certainly can’t predict the circumstance of your death. Not to get too graphic, but what if your spouse witnesses your death in a car accident or some other tragedy? It could take them years to overcome a traumatic event like that. Who knows when – or if – they will be able to pick up their career after recovering.
My point is this: it’s best to prepare for the worst and hope for the best. Protecting your biggest asset – your future earnings – is the 1 thing you need to do if you want to fully protect your family’s financial future.
This obviously means getting life insurance. The problem is that life insurance is a pain.
Getting Life Insurance is Time-Consuming and Annoying
Life insurance used to be a very involved process. In fact, when I was discussing life insurance with my insurance agent she said that she would want to sit down with us in-person to discuss our life insurance options.
Sit down with us? Really? Is this the same insurance agent who I absolutely love because 99% of our communications are via email?
Not to mention sitting down with us would involve her driving down to the Twin Cities from her office, which is 2 hours away.
Yes, offering to sit down with us was a nice gesture. But how many things do you buy where you really need a one-on-one conversation? Even with car-shopping a large portion of the shopping experience is done browsing information online.
Let’s face it: the current process for getting life insurance is outdated. It hasn’t kept up with the times. Why isn’t it more automated? Why can’t it be done online? And why the heck do life insurance agents always want to meet you in person?
It’s not an attractive process for 20- and 30-somethings to take part in. We’re too busy to sit down and listen to a salesperson.
Thankfully there’s a new way to shop for life insurance.
Policy Genius is a way to get life insurance quotes online in as few as 5 minutes. I just finished signing up for a policy through them and getting my initial quote was easy and made me feel better about going forward with a policy.
I highly recommend you see how much life insurance would cost you at Policy Genius.
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I’ve never heard of Quotacy, DC. Thanks for sharing. I will say though that purchasing life insurance was one of the best financial decisions we’ve ever made. We did it while we were young, and the rates are super cheap too.
I could not agree more DC. I know it’s not sexy or glamorous, but life insurance is such an important thing to look at seriously. Don’t forget a will either as you want to make sure you get a say over what happens to your assets when you pass. Anyway, we do virtually everything online ourselves as it’s just so much more convenient.
We have life insurance policies on both my wife and I even though she earns the majority of the family income. We wanted to make sure we had the flexibility to make wise choices should either of us pass away. This expense has to make it’s way into the family budget…it’s that important.
Term life is cheap. It may be a pain to buy, but at least you only have to do it once for several decades of coverage.
We made a decision to let our company provided life insurance 1-2x annual salary act as coverage and self insure with our current financial decision. Also life insurance is simple enough for me to understand that I would go online if I changed my mind.
Laurie WellKeptWallet I’m glad I could share Quotacy for you. I think it’s smart to buy young, but it’s also such an easy thing for millennials and those in their 20s and 30s to talk themselves out of buying. Definitely something that people should consider.
FrugalRules I think more and more people want the faster, online solution versus sitting down and discussing things with someone. There are some exceptions (buying a home comes to mind) but even those exceptions are being automated in small ways through online companies.
Brian @ Luke1428 I think that’s a smart approach, and something I’m considering for my wife and me. Having a spouse pass away prematurely can rock your world, so I think sometimes it doesn’t really matter who makes most of the money.
Holly at ClubThrifty I agree that term life is cheap and definitely affordable if someone makes it a priority. I also agree that it’s nice how you only have to buy it once and then you are set for years and years.
EvenStevenMoney I get 2x my salary in life insurance through work, but I don’t think it’s enough (especially if you have debt). I like the idea of having all debts cleared + a lot of extra money in the bank. You never know how the premature death of a spouse will affect you.
I’m probably in the minority, but I honestly don’t know much about life insurance. My work pays my policy and I’ve never given it much thought. Maybe because I’m still single and don’t have kids? I’ll have to take a look at Quotacy and see what it’s all about, thanks for sharing!
Mr. Smith’s mother died unexpectedly when he was a young boy. He signed us up for life insurance years ago, during our era of debt accumulation. I’m glad that he did. Now that we have a family, it’ s nice to not have to worry.
Do you know if you still have to have the physical. They usually come to you but it’s still a pain. I’d probably pick up more insurance if I didn’t have to do that.
Life insurance is an absolute ‘must have’ if you have dependents.
I don’t know about the US but in Australia life insurance is paid directly to the beneficiary and not the deceased’s estate – that means the money can be used immediately and not potentially held up in probate for months. That’s got to take a huge amount of pressure off your loved one’s shoulders when they’re already dealing with immense grief. That peace of mind is priceless!
I just found out that someone we know died on the Metro North train that crashed in Westchester and he left behind a wife and three small children. The first thing that came into my mind, other than how sad it was, was that I hope that he had life insurance. If you are married and absolutely if you have kids, life insurance needs to be a part of your financial plan.
Eyesonthedollar Because this is a life insurance broker instead of an actual life insurance company that underwrites the policies, I would expect it to depend on who you choose as the insurer.
Harmony@CreatingMyKaleidoscope Thanks for sharing your story. I think there are many people who have found life insurance to greatly benefit them when unexpected deaths in the family happen.
believeinabudget Your work policy is probably sufficient if you’re single. The biggest reason single people should get life insurance, though, is if they co-signed any debt with parents, relatives, or friends. If you pass away prematurely the co-signer will be on the hook for all the debt.
smartmoneysimplelife Hmmm I’ll have to look into that. I’m really curious now if the US has the same policies as Australia or if it differs. We love our court system in the US so I wouldn’t be surprised if it differed from Australia.
blonde_finance I’m so sorry to hear that. What a tragedy that was (and is). It’s stuff like that that makes life completely unpredictable. Life insurance is so important.