How to Give Your Budget an Easy $300 Boost
Just imagine how powerful your budget would be with a $300 boost each month. You could accomplish some big money goals. Here are just a few possibilities:
Give debt the boot. Let’s say you owe $7,000 on your credit card at 17% interest. At $200 a month, you’d pay it off in a little over four years. Bump your monthly payment up to $500, and you’d kiss that debt goodbye in just 16 months, saving nearly $2,000 in interest.
Save for retirement. Worried you won’t be able to make ends meet in your golden years? Invest $300 a month into good growth stock mutual funds, and you could retire with $650,000 to $970,000 in 30 years.
Pay off your mortgage. Consider the difference $300 could make if you apply it to your monthly mortgage payment. At 4% interest, you could pay off a $200,000 30-year mortgage in 19 years, saving more than $58,000 in the process.
Sounds pretty awesome, right?
Well, we’re here to let you in on a little secret: There’s an easy way to make it happen. With one simple change to your insurance policy, you could add hundreds back to your budget each month.
The Cash-Value Insurance Cost Trap
Everyone knows life insurance is important. After all, there’s no better way to love your family than to ensure they’ll be taken care of if something happens to you.
What most folks don’t know is life insurance doesn’t have to cost you an arm and a leg. In fact, research shows that the average whole life policy costs over $6,700 a year, while the average term policy is a tenth of that at $660 a year.1
People flock to cash-value policies because they package insurance and savings together. Yet it’s one of the worst financial products out there. Need convincing? Let’s take a closer look.
Weighing Your Insurance Options
We’ll start with a simple cost comparison. Jackie is a healthy 40-year-old working mom who brings home $50,000 a year. She wants her family to be able to recoup her salary long after she’s gone, so she shops for $500,000 in life insurance coverage.
Here’s what she finds.
- Jackie could get a 30-year term life insurance policy for as little as $26 a month.
- Whole life insurance, a common type of cash-value insurance, would cost her over $500 a month.
That’s $465 more each month—and a $111,820 difference over 20 years!2
The Whole Ugly Truth
If whole life insurance costs so much, why do people pay for it? It’s pitched as a way to invest for the future. Most people think all that extra cash goes right to savings.The reality isn’t pretty.
With whole life insurance, you spend thousands of dollars more a year for your hard-earned money to sit in an “investment” that brings horrible returns. Not only does a good chunk of your premium go toward commission and expenses, but any leftover savings earns much less than it would if you invested in mutual funds instead.
According to Consumer Reports, the minimum return many whole life insurers guarantee is 1.5–3.5%.3 Even if you earned 4–6% on your cash value account, you’d still underperform the S&P 500—a standard measurement of stock market performance. It’s averaged a 12% growth rate over the past 80 years.4
But here’s the worst part: If something happens to you, your family only gets the face value of your policy, which is $450,000 in Jackie’s example above.
All that extra money you “saved” in your cash-value account after years of overpaying for life insurance? Gone. It doesn’t matter if the account’s worth $1,000 or $100,000. Your loved ones won’t see a cent of it. What’s the point of putting your hard-earned dollars in an account that will never actually benefit anyone?
A Better Way to Plan for the Future
Term life insurance enables you to protect your family today and build a promising tomorrow. So trade in that whole life policy for term life insurance!
If you want to leave a legacy your loved ones can actually benefit from, take control of your money now. That way you’ll be self-insured by the time your life insurance term is up. With no debt, a healthy nest egg and a paid-off mortgage, you can rest easy knowing your family will manage just fine if something happens to you.
Ready to see what term life insurance can do for your budget? Ask an insurance agent you trust how much you can save each month—and put those dollars to work for you!