Life after death

Life insurance. It’s one of those things I never really thought about until I got married and wondered ‘What would happen to my spouse/family if I were gone suddenly?’ It’s a question anyone with dependents should ask, and I’m going to add younger siblings to the list of potential ‘dependents,’ even if they themselves are adults.

I’m talking term life insurance, NOT ‘whole life,’ ‘universal life’ or any of those other products that they’ll come up with in order to charge you an arm and a leg while you think you’re getting some kind of ‘cash value.’ We cashed out my husband’s cash value last year on a policy he’d had since childhood, and got less than $2K. Buy term and invest the difference to be self-insured by the time the term ends.

You’ll read and hear lots of advice on the amount of coverage you should have. Dave Ramsey says 8 to 10 times your income in term insurance is the rule of thumb. For most healthy people just starting off, locking into a 20 or 30 year term of life insurance will be ridiculously cheap, like pennies on the dollar for the amount of coverage.

We’re going to be looking 50 in the face when our term is up, and with our plan to be able to retire at 55, we can let our term lapse or renew it for another 20 years, which would then bring us to age 70–by which time we had better NOT need the pittance of life insurance we’re getting compared to the millions we should have saved by then!

Since we originally got $150,000 of coverage on each of us when we got married and our incomes have changed significantly since that time (only 2 years ago!), we went into our insurance guy yesterday to increase our coverage–love him, same guy my parents have used since they got married, and I highly recommend working with someone you trust for these things. [Little story about our guy: when we went to buy our new car, we didn’t have our insurance cards with us since my parents drove us to the car lot. The dealer actually knew our insurance guy and I had his business card in my wallet so the dealer called up our insurance guy, who immediately faxed over the needed info. to the dealer and added our new vehicle to our policy right then. It was awesome.]

We still have to get our blood tests and answer that slew of questions which includes, ‘Have you ever gone skydiving/bungee jumping/used a hair dryer near a full bathtub/gone outside with wet hair?’ but the paperwork is done.

It will still suck thinking about one of us leaving this earth before the other, but that is an inevitability, and I’d rather know that if we needed to, either of us wouldn’t have to worry about bills for many, many years with the coverage we’ll have. The way our beneficiaries are set up, my 6-years-younger-than-me sister would be taken care of instead.

Year end wrap-up

We’re nearing the last couple paychecks this year, and I was looking at some of our numbers for the year in an attempt to get ready to do our taxes as soon as the forms start rolling in…

$13,369.27 of debt paid off
$2,000.54 in student loan interest paid (estimated)
$10,000 goal for emergency savings by the end of February 2011 — nearly there

This is also going to be the first year that we’re probably going to owe federal income tax–and I’m more than definitely okay with that. Only $2,500 of student loan interest is deductible, so I’m glad we aren’t over that amount. Seeing that we paid as much as we did on interest makes me feel a little twitchy, and the tax benefit only slightly makes up for that. Next year, the plan is to kick the debt snowball into high gear and pay off more than half of what’s left. We’re coming to get you, debt…

The cost of kids

I read the Christian Science Monitor’s cover article on the cost of kids with much interest over the weekend. I actually wasn’t surprised that the average cost of raising a child from age 0-17 (not including college) is an average of $222,000.

That actually sounds kind of low to me. I know infant daycare alone can run into hundreds of dollars a week, and many families don’t have the option of a stay-at-home parent (or the parents don’t want to stay home). Someone in the article quoted $1,000/month for the first five years of a child’s life. That’s $60,000 from infant to kindergarten.

I find all of this very interesting, because I have a lot of friends who have started families and I wonder about the impact on their budgets. Housing, food, transportation, and education/caretaking account for the biggest areas of spending:

Now I know what to say when people ask when we’re having kids–as soon as I have an extra thousand dollars a month that I don’t need to pay bills and save for retirement! But seriously, that’s a lot of money, not to mention the time commitment, which has its own cost. Parents, of course, say that the cost is worth it. That’s an individual judgment people need to make for themselves–for some, the cost and responsibility is most definitely not worth it.

There are a lot of people who say “You’ll never have enough money, so why not just do it now?” I humbly disagree. Maybe the people who say that have six-figure incomes and no debt… but probably not.