I’ve had a term life policy in place since Christy and I were married. About 7 years ago my policy was up, so Christy and I both got a term life policy this time. I am the kind of guy that would rather go big on something to make sure it can accommodate change or growth. Christy on the other hand, is usually more focused on the bottom line. We ran into that scenario with our new term policies.
I would have rather got what some may see as a ridiculous amount – 1 million. However, Christy thought that number was a little coo coo. I see her point. Why pay more than you need to for something you hope that you’ll never have to use. And we are humble people, so saying 1 million sounds like a crazy amount of money, but I wanted to make sure her and the kids were taken care of if the worst should happen. Although she will tell you that I don’t stop talking about something until I get my way (which has happened on occasion, so there is truth to that), we ultimately went with 1/4 of where I wanted to be.
I don’t know if it’s getting older and thinking about my mortality, being more focused on finances, or both, but I’ve been thinking about our term life policy lately and thinking we need more coverage. What I’ve heard and read is that you should have 10 to 12 times your annual income. If that is the case, I was right on the money with wanting 1 million in coverage initially. I just wished I had the information and reasoning to back it up at the time. When you really think about it, 1 million dollars really isn’t that much. I thought about the fact that I made over 1 million dollars in the last 10 years and we are living in a 1,200 square foot house in NJ with 1 car in a less than desirable neighborhood, and with all of our frugality, still feel like our money is tight.
Most people will make multi millions in their working life. A person making just $25,000 a year will gross 1 million over 40 years of working. Most people work more than 40 years and I’d venture to say that most exceed $25,000 as their careers progress (at least I would hope so). The median household income in 2018 was $61,937. Now, I know that you don’t start your working life at the middle of the pay scale, so lets just say you made that median income the 2nd half of your life. Your last 20 years, half of your working life, would still end up at $1,238,740 gross pay, and that number is 2 years old. I don’t have the statistics on this, but I think it’s safe to say most people in the middle class will earn more than 2 million in their working life. So a million dollars doesn’t really get you as far as you think it would.
Ever since I’ve been focused on our current and future finances, I’ve become a little obsessed with spreadsheets. I’ll detail this in another post, but in my master spreadsheet I created a tab for life insurance that calculates the growth if a certain dollar amount of my policy payout was invested to help show what my family would earn and assure their needs were met if I were not around. We are a one income family and I want to keep it that way. If I were to pass prematurely I don’t want Christy to feel pressured to jump into the workforce to support her and the kids and have to put them in public school. To me…to both of us, it’s important that she is there to raise and nurture our children. Some might see that as an unattainable luxury in the crazy world we live in, but that is a personal decision that we have sacrificed for and discarded all notions of keeping up with the Joneses.
So in this spreadsheet, I also kept track of all the quotes for different term life insurance policies, at different terms. Not wanting to spend more money than I needed to, I have not acted on any of those yet. My plan was to lose weight to try to lower my premium. It’s a win / win. I pay less in premiums over the next 15 years, thereby saving money to grow our retirement, and I get in better shape to help avoid Christy having to cash in that policy. But, that hasn’t been going so well. I try to eat better. I try to exercise. It’s just not enough. I tried running instead of walking to burn some extra calories. That lasted a few weeks, until I got this sharp pain right under my kneecap and a pinched nerve feeling radiating from my knee down my leg. I didn’t go to the orthopedic to confirm, but from what I read it was possibly an impact fracture from my fat ass repeatedly pounding my feet onto the ground. So I stopped all exercising for about 6 weeks until I felt better, with the exception of the occasional walk with the family after dinner. Lately it’s been even harder. I am so damn bored from being cooped up every day due to the COVID-19 state lock down that I took back up the ancient tradition of drinking on the weekends.
I don’t think I’m going to be able to shed the extra pounds in a timely manner. I need to just suck it up and pay the extra premiums. By the time I get down to a weight that will lower my premium, it will probably go up even higher than those savings due to my age. On the plus side, it has made me want to be in better shape. I might not be in the shape I’d like to be, but every little bit helps, right?