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Finding And Buying Affordable Term Life Insurance Should Be A Priority

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When I was following Dave Ramsey's 7 Baby Steps a year or two back (I suppose we still are), I was convinced that I needed to buy a term life insurance policy.  They give some very vivid stories in their Financial Peace University class from some folks who were in Dave's class who bought life insurance, only to find out months or years later that they had terminal cancer or some other illness.  I knew it was a good idea that I buy life insurance to protect my family as well in case of a life changing event, but I had just never followed through.

When we had our son last summer I knew I had put it off long enough, and that it was time for me to take action and buy a policy.  I didn't want my wife to have to muddle through without me in case I were to die, I wanted her and my son to be taken care of, with enough money to live on comfortably if I were to pass.

When Should A Person Buy Life Insurance?

There are several frames of reference when it comes to buying life insurance.

There are those that say that y0u should buy it when you're young, because that way you can ensure that you get the best rates because you're young and healthy.   They say you should buy it even before you have children or a spouse because you never know when you'll have a health event or health issue crop up that could keep you from getting affordable Term Life Insurance.

Then there are those that say you should buy life insurance only when you need to because you've got dependents, and folks who are relying on you to provide for them.   Buying before then is just a waste of money.

I used to come down in the second camp, but I've been swayed to the first camp (buying early) for a couple of reasons.  First, you can buy an extremely good policy when you're young at an extremely reasonable cost.  For example, i got a $500,000 term life insurance policy for about $30/month. I probably could have gotten an even cheaper policy if it weren't for my weight being a bit high at the time (I'm currently working on that).  Also – my wife had a health event in 2008 that made me realize that you really do never know when you're going to need insurance because negative health events can pop up at any time.

How Much Should Your Policy Be For?

Before you buy your policy one thing you need to decide on is how much your policy will be for.  Most experts I've read will recommend something in the range of 8-10 times your annual salary.   So, for example, if you're making $50,000/year, you would want to get a policy in the range of  $400,000-500,000.

Some more conservative experts will recommend even more than that saying that you should have somewhere in the range of 17-20 times your annual salary.   For a $50,000 salary that would come to around $850,000-1,000,000 for the policy.

No matter what you do, do your research before you buy, reading up on the different types of policies, and where to buy through educational resources like AARP.org.

Save On Your Insurance By Paying For Your Policy Quarterly Or Yearly

One thing to consider when buying your policy is whether you can save money by paying for your policy in quarterly or yearly installments.  A lot of companies will give you a pretty decent discount if you pay up front for the entire year.

The only reason why I might not do this is because  – as some experts point out – if you pre-pay for your year's policy and then die part way through the year, you won't be getting back your dues for those final months.  You've pre-paid. Granted it may only be a couple hundred bucks, but still.

In any event – always make sure that you set up automatic payments for your life insurance, and that you never let it lapse.  You don't want to have someone die, and then figure out that the policy lapsed because payments hadn't been made for a couple of months.

Conclusion

We bought term life insurance last year as insurance against my untimely demise.   I don't my wife to have to worry about having to pay the bills in case I were to die.   I bought my policy while I was still relatively young and in good health – so my policy is pretty cheap, and if you do the same yours will probably be as well.  I'd recommend you buy your policy ASAP as well, because we never know when we might get sick, have a negative health event or, God forbid, die.

Do you have a life insurance policy? Why or why not?

How We Blew Our Baby Budget, And How You Can Avoid Our Mistakes

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Last June 30th our son Carter was born. He weighed in at 8 pounds even and was 21 inches in length. Since then he has grown rapidly, to the point where is now somewhere around 20 lbs, and his height is in the 95th percentile. He's got two parents who are either near or over 6 feet tall, so we have a feeling he's going to be tall as well. In the past couple of months he's started crawling and standing on his own, and we're sure the walking part is just days away.

Have a child at the house has been an amazing event in our lives, and we both feel very blessed that our little boy has been healthy thus far. But while life with Carter has been a lot of fun, it hasn't all been rainbows and unicorns. There have been new expenses cropping up all the time, along with the reduced income as my wife quit her job to stay home with our son. We've found that certain areas were more expensive than we expected, while others weren't as bad as we thought.

Today I thought I'd do a quick look at some areas that we found that we spent more than we had expected, as well as talking about how you can avoid having your own expenses get too far out of control.

Baby Expenses That Were Higher Than We Expected

When we found out that we were expecting, I started researching how much we could expect to spend on our new baby.  Here are some of the expenses we expected, that ended up being higher than we thought.

  • Furniture and accessories for the baby:   Over the past year this is probably one of our highest spending categories for the baby.  I originally thought that we could get away with spending a minimal amount on baby furniture, but in the end we ended up paying for things like a crib, changing table, dressers and bookshelves, a rocking chair, baby chairs, Johnny Jump-Up and more. On top of that a lot of that furniture came with accessories, like sheets, pads, rail guards, safety bumpers and a thousand other little gadgets.   All in all we've probably spent somewhere in the range of $1500-2000 or more on these things (probably more).  How can you get away with not spending as much? Buy your furniture used, or get it from a secondhand store.  It'll be just about as good.  Don't buy all the accessories for every piece of furniture that you  buy because it's just not necessary. Don't fall prey to the appeals that many companies use that make you think that if you don't buy their gadget or product that your child won't be safe or happy.  They will be fine.
  • Clothes for the baby: When we had our baby showers we got a ton of baby clothing that ranged anywhere from 0-3 months, all the way up to 18-24 months.    Because we had received so much clothing I underestimated just how much more clothing we would need.  Part of the problem is that the child grows so fast that they grow out of clothes before they've even had a chance to wear them.  The other thing I underestimated was my wife's need to buy all sorts of “cute baby clothes” for our son.  She would see something she thought was cute and then buy it.  I can't tell you how many pieces of clothing he never even wore because he just grew so fast. We did have a budget meeting about that one to cut this category down a bit.  How can you get away with not spending as much? Try to buy your baby's clothes at a secondhand store. Most of the clothes there are very lightly used anyway, much of it is brand new with tags still attached. Also try to ask for a wide variety of age range clothes at the baby shower. A lot of people want to buy cute clothes for newborns, when in fact that baby will only be that size for a very short time. 
  • Toys:  We got quite a few toys for the baby via the baby showers, but once again both mommy and daddy went a little crazy on the toy front.  First child and all.  We have had to cut back on how much we're spending here because we spent way too much.  Funny thing is, our son actually prefers playing with things we already had – like paper, and candy wrappers and the dog. Go figure. How can you get away with not spending as much? Simple, just don't buy as many toys for your kids, especially when they're younger.  They won't be able to appreciate them anyway, they're more for you as an adult!  If you do buy toys, find gently used ones at secondhand stores or thrift stores.   Buy fewer toys, and rotate them. As the child tires of one toy, rotate in the  other one. Fewer toys, but more fun!
  • Increased medical costs:  We're the prototypical first time parents, always getting worried about every little noise Carter made, every little wheeze or sneeze.  We've taken him in to the doctor many times in the last  year.  Some of those times it was a good thing because he had ear infections or other infections.  Other times it was just a little runny nose.  When you're going so often, however, the co-pays add up.  Over the past year we've spent more than we budgeted for on medical care.  It's too bad, I could have added more to my flexible spending account! How can you get away with not spending as much? This is one area that you may not want to skimp on. Things we could possibly have done better to save a little money are some of those visits to the doctor when even the smallest little thing cropped up.  A little bit of a runny  nose may not be that big of a deal.  On the other hand, if we hadn't been careful we could have missed those ear infections that our son had, which could have lead to big problems. One of my wife's cousins had a baby last year as well, and had a burst ear-drum due to an ear infection.    Moral of the story, be careful about your kid's health care, but use your judgement in taking them in.
  • Babyproofing costs:  Another area where we probably spent more than we needed to was in babyproofing the house.  My wife is big on making sure our son is safe, and while I agree with that sentiment, I'm not as extreme when it comes to padding every surface, locking down every shelf, putting gates around every corner and putting child-proof knobs on every door.  How can you get away with not spending as much? I think that there is a line when safety becomes overkill.  For example, do you need to pad the corners of a table that is higher than the child can reach? No.  Do you need to lock cabinets higher than the child can reach?  No.   The key here is to provide for your child's safety, while still allowing for common sense.   You can't protect your child against everything, and they have to learn the consequences of their actions at some point right?  Cover the most apparent dangers where you can, but don't go overboard.

So those are a few areas where we spent more than we had intended, and how you can attempt to avoid the same mistakes.

What areas did you overspend with for your children?  What expenses do you think can be avoided?  Tell us about your baby expenses and where you overspent in the comments.