Table of Contents
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
- After meeting with a financial planner, my husband and I set out to pay off our credit card debt. We did it in six months, and during that time I started earning more money than ever.
- Our financial planner recommended that I buy a term life insurance policy since I was only protected for $20,000 on my husband’s employer-provided policy.
- He recommended $1.4 million in coverage for me, which felt high. But after accounting for our standard of living and future financial goals, I went for it.
- Now, I feel good about paying $70 a month for that peace of mind.
- Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »
“Protect, optimize, grow.”
Tom, our CFP, introduced this financial approach on our first call — a simple, three-step perspective that would guide our work together. The idea is that before you can build wealth, you need to protect your assets (through life and disability insurance) and optimize cash flow (in our case, setting up a separate account for my business and hiring an experienced CPA to help with taxes).
We started by getting out of debt
When my husband, Tim, and I first started working with Tom in 2019, we came up with a plan specific to our financial situation. We decided together that we would work as hard as we could to pay off as much debt as possible, then start protecting and optimizing our money. The approach made sense. Clean up the mess we had made in the past, then look forward to new ways of promoting financial well-being.
I’m proud to say we knocked out our $30,000 in credit card debt in six months, ultimately saving hundreds of dollars a month in interest payments. During those months, I took on lots of extra freelance writing work to increase our cash flow, and all of the money I made went straight to credit cards.
Our financial priorities shifted with COVID-19
Once the debt was gone, we found ourselves in an unfamiliar financial situation: For the first time in our marriage, we had extra money.
Another surprising part was that I was out-earning my husband. I had been a stay-at-home parent for my 6-year-old son’s first few years, and now, my writing hobby had become a lucrative career. Now that our debt was mostly paid off and we weren’t living paycheck to paycheck, it was time to think seriously about protecting our assets.
We adjusted our budget as a first step, now that all those pesky credit card payments were gone. Then, it was time to start thinking about our income from a new perspective.
How could we make sure that the same amount of money we had worked so hard for would be available to our family, even if one of us wasn’t around? Admittedly, the pandemic made this line of thought easier. Our priorities, financial and otherwise, became clearer and more urgent when we realized how swiftly life could change — and, honestly, how fragile it all was.
Getting my life insurance policy
As a freelancer, I don’t have access to employer benefits, such as life insurance, like my husband does. Tom recommended I consider purchasing a supplemental term life insurance policy to protect my income, which prompted us to do a little digging into the coverage we already had. I knew in the back of my brain that my husband had purchased a life insurance policy through his employer, but I didn’t know much about it. I’m so glad we looked: I was only covered on his policy for $20,000, which would barely cover three months of our current expenses.
Tom recommended I buy my own $1.4 million term life insurance policy, and at first, I was shocked at the amount. I was a freelancer making six figures — I knew my situation was rare and valuable. But I didn’t think my life was worth more than $1 million.
When I voiced my concern, Tom shared some helpful insight. He had calculated the amount based not just on our current financial needs, but our future financial goals as well. It wasn’t just about making sure Tim could afford the house payment and daycare for our kids without my income; it was about making sure he could also save for things like the boys’ college education and his own retirement, without sacrificing the quality of life we currently enjoy. I thought about it, and if the unthinkable happened to me, I didn’t want Tim to have to worry about money on top of the stress of raising two kids on his own.
So we decided to move forward, and after a few months of underwriting, I found out I had been approved for a $1.4 million, 48-year term life insurance policy (which gets me to age 80). It wasn’t the exact level of coverage Tom had initially recommended, because I have a few pre-existing medical conditions that make me higher risk, which I expected. I pay around $70 per month for my premium, which increases over time as I age (with a cap on how much I’ll pay, even if my health status changes).
I’ll admit, at first, it wasn’t easy to spend that extra money to protect my family from an event that likely won’t happen. And I still sometimes wonder if the policy is too high. But when I began to think about life insurance as a way to guarantee the future we envision as a family, it makes so much more sense. And I’m glad to trade in a few DoorDash orders every month for the peace of mind the policy provides.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.