Adulting happens. Usually because good stuff happens. Your career gets going. You meet the ONE. You get married. You buy a home. Not all in that order, necessarily, but you know what I mean. The big stuff begins to happen in your life. You make big choices. You have RESPONSIBILITIES. Some of those responsibilities have names. Like Emma and Milo. Or Wyatt and Olivia. Or just Junior.
Starting a family, having kids, produces new scenarios into your thoughtlife. You find yourself thinking, “What if something happens to me?” You might bargain with God. “Just until they finish college”, you plead. You realize you need peace of mind. You need to know that your spouse and/or your mini-me(s) will survive, even thrive, should something happen to you. It might feel a bit scary.
You begin to talk with your spouse about things you never dreamed you would be discussing. Things like living wills. Things like power of attorney. Things like...GASP!...life insurance.
You are hard at adulting now. And I say, “Good for you.”
Here’s why. Putting a plan in place for unforeseeable events is next stage adulting. You are ready to be the partner your spouse deserves, the parent your children need.
So, what do you do next? Well, for legal matters, you should see a lawyer. Ask family and friends who they use. Drop me an email. I know a few good ones. However, if you feel confident to do it yourself, you can find and download simple online living wills and power of attorney forms. If you have dependent minors, it is important to understand the custody laws in your state and to whom your children would be entrusted should something happen to you.
For finances, find yourself a financial coach. Just as the name implies, a coach is the person who helps you reach the goal line. Specifically, a financial coach will assist you in several ways:
In Season 4 of the Big Bang Theory, Sheldon does the math on his own life expectancy and realizes he’s going to die in just a few years if he doesn’t make some changes. For starters, he decides to eat more vegetables and begin jogging. Then, after he falls down a flight of stairs, in order to stay safe, he invents his ‘virtual self’ in a robot form with which to go out into the world.
While it goes without saying that none of us is as smart as Sheldon or that a sitcom exists primarily to provide entertainment, the “The Cruciferous Vegetable Amplification” episode illustrates perfectly what happens to us all: We. Will. Die.
The comedic relief softens the blow, but the episode also drives home two things:
Rather than building your virtual self, however, I suggest something far simpler. Invest in life insurance. To be absolutely specific, term life insurance.
Adulting: Life Insurance
You may have some knowledge of life insurance or have purchased life insurance already. You may have it through your job. I want to clarify the true purpose of life insurance. Then, I want to tell you why you only want term life insurance.
First of all, here is the definition of life insurance, courtesy yours truly:
Life insurance is simply designed to replace income when someone else is relying on that.
So, when you’re married and your spouse relies on your income, then there is a need for life insurance. When you have children who rely on your income, then you need life insurance.
Next, there are two basic forms of life insurance from which to choose:
There is whole life. Whole life is essentially a life insurance policy combined with a savings account. It’s typically sold to those of us wanting to create a means to save for retirement or who are planning for a large purchase down the road, such as a house.
That would be most of us millennials.
So, you sit down with a life insurance agent and he or she suggests whole life insurance as the best way to go.
You may hear these phrases:
‘You only have to qualify for it once so you never have to worry about proving your health again.’
‘Whole life is going to pay its own premiums after a while - keep it long enough and you won’t even have to pay for it anymore.’
‘It creates a nest egg for your retirement.’
‘It’s always there for an emergency if you need it back.’
Basically, these are lies designed to get you to buy a product.
One of the biggest injustices brought upon middle America is the selling of whole life insurance by the large insurance companies. In fact, I believe it’s one of the major contributing factors to the lack of wealth in the majority of our society today.
I know it sounds absolute. I also know it’s true.
Whole life is more expensive than term insurance...way more expensive...3 to 5 times more expensive. Not only is it more expensive, whole life over promises and under performs.
So, a counter argument to that would be that term insurance expires. It does expire.
That’s the whole point: you don’t need life insurance for your entire life.
Any life insurance agent who tells you that is lying to you and trying to make money off of you.
Here is what these companies downplay.
For the first 6 -12 months, your policy won’t earn anything in savings.
Sometimes is takes up to 2 - 3 year for the company to recoup their fees. So, it’s like paying 3 years for a savings account and you’re not getting a dime added to it.
Once the policy does begin to accumulate savings, it is going to start with a rate of return somewhere between 1 and 4%. I’ve never seen one over 4. Remember the rule of 72 from my previous blog post? Do the math.
So, let’s imagine a scenario: You have an emergency and you need money now.
These policies have it written in, that if you ever need this money back, you have to request the money and the companies can (and often do) take up to 6 months to give it to you.
Here’s another scenario: You are 65 and you want to take some of that cash out for retirement, or to buy a house,
If you need that money, you must borrow it from the policy. However, it’s not a loan like you loan to yourself, where you pay interest to yourself. No, when you take a loan against the policy, the interest you pay on that loan goes to the insurance company.
If you don’t pay it back, that loan amount comes off the face value of the policy should you die.
There’s a reason these policies are 30 and 40 pages long...all this has to be spelled out, all these details. It is so convoluted and the language so difficult to follow at times. No wonder 99% of those who purchase never read the contract.
It’s a huge injustice to individuals to spend way more money for a product that is not creating any value for them. It’s causing middle income Americans to go further into debt.
If you have this kind of policy, then call me and let’s sit down together.
I will show you in your contract exactly where it says these things. I will highlight the details for you and help you understand exactly what it all means. I will help you find a better way.
It’s not your fault if you were duped. The adult thing, however, is to do something about it.