Americans, one could argue, have a certain way of going overboard. From the epic serving sizes at popular chain restaurants — does anyone need a triple cheeseburger? — to the closet full of never-worn outfits, most of us can think of ways to cut back at least one category in our budgets without even trying that hard.
It’s a simple fact: making a budget (and then sticking to it) is best way to save money. Some things, like a mortgage or rent, a car payment, groceries and utility bills, are almost always going to be priorities. For most of us, late-night Amazon binges, weekend getaways and elaborate dinners at the hot new restaurant should be occasional treats, not a way of life.
Life insurance: Lock it in.
Life insurance should be one of the non-negotiables in your budget. Your family needs the financial security that life insurance provides. If something happens to you or your spouse, you need to know that a tough situation won’t be much worse thanks to financial hardship.
Worried that you have the wrong coverage? There are smart ways to make sure you aren’t paying for a policy that your family won’t ultimately need.
Understanding life insurance
What is life insurance? It’s simple: life insurance is really just the products and policies that guarantee your family adequate financial resources in the event of your death.
Pretty straightforward right? But how exactly can you make sure that you’re not paying for something your family won’t use? You can barely stick to your grocery budget — how can you possibly know the precise dollar value that will support for your family for the rest of their lives?
That’s impossible to answer with complete accuracy, of course. Even if you had months to mull it over, no one really wants to spend all of their free time planning for their family’s lives in the event of their own untimely death. It starts to feel a little morbid.
Budgeting for anything – healthcare, WiFi, even the family trip to DisneyWorld – involves estimates based on research and experience combined with good, old-fashioned guesswork. You may assume that budgeting for a life insurance policy involves more guessing, less strategy. It’s tough to say how much money your family is going to need if you’re not around at some arbitrary point in the future.
Figuring out how much life insurance you need
There actually is a sound strategy for identifying the best life insurance policy both for your family’s future needs and for your own budget. While there may not be a tool that calculates your how much your baby braces will cost when she’s 10 years old, there are life insurance calculators that help you determine a surprisingly accurate number for what you can expect to earn over your lifetime.
A simple online search for ‘life insurance calculators’ online will take you to free, online tools that many life insurance providers post on their website. These calculators will show you how to calculate the Death Benefit amount that will suffice for your family.
While any life insurance calculator will be helpful, military families need to take the specific costs and benefits of military life into consideration. For example, Survivor Benefit Plan (SBP) and other sources of income and benefits are unique to the Armed Forces.
AAFMAA’s life insurance calculator, for example, provides a template to ensure that its members think about all the significant sources of income available to them throughout their lives.
The value that you determine with AAFMAA’s calculator will also reflect general financial considerations. Most servicemen and women expect to transition out of the military. These veterans have to think about their finances from a military standpoint and a civilian frame of mind.
Once you have a better idea of how much life insurance your family needs, shopping for a policy is a lot more manageable. You’ll quickly see that purchasing a million dollar policy is not as unreasonable as you may have thought. You may realize that your family needs a policy that’s much less expensive than your current coverage. Maybe that extra money will cover a little summer trip somewhere fun.
More money and peace of mind: A nice combo
Knowing what you really need is the first step towards balancing your budget. Yes, life insurance and financial planning can seem complicated — but remember that hasty decisions made to end a little temporary discomfort aren’t going to help your family. Step up to the challenge.
A life insurance calculator will help you identify an adequate policy. Armed with this info, you can purchase the right life insurance policy. You can be sure you aren’t paying too much for something you don’t need, or too little for a life insurance policy that doesn’t meet the needs of your family.
Make the best decisions. Your family deserves it. Now go get a triple cheeseburger.
This post was provided by AAFMAA. AAFMAA is a non-profit, membership association that supports the American Armed Forces community with affordable insurance and widow survivor assistance services. AAFMAA also created SpouseLink.org, a website for Military Spouses that was designed to support, inform and inspire users with a variety of content–anything from pop culture to important Military information.
Photo: Flickr: moolanomy