Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis, and February is “insurance month.” I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.
JW is thirty-one years old and a father of one with another one on the way within a month. He works in retail and is underemployed, and his wife and son are on state medical plans, and their income is supplemented by SNAP (food stamps). Read his bio for more information about his family’s situation.
His goal is to be able to provide for his family while still tithing 10% of his income to his church. JW is on Team Neal, with Certified Financial Planner Neal Frankle. For JW’s progress throughout 2012, read his previous update. Today’s financial report describes his progress throughout January 2013, with comparisons from the two months leading up.
JW’s comments and analysis
Our baby born on Jan 29.
Taxes have been filed. Our refund of $4,100 is coming in February. First we will tithe on that amount. Plans for the remaining are to use some for more car repairs, new baby supplies and furniture, and to pay off a chunk of the student loan. The remainder will offset reduced pay due to time off for the baby.
The biggest expense over January was taking my car in for repair. The ABS light has been on, and I knew the driver’s side front wheel needed a new ABS harness. I had been to multiple shops over the past year without any diagnosing why this light was coming on. After someone suggested a different shop, I took the car in on a free day.
After we paid off the car loan we increased our automatic transfer for car repair by $200 to $265 per month. This money is now earmarked for repairs or our next car. With the money already set aside, the $735 repair bill was covered. We do still have $300 to $500 more in repairs that are waiting for more savings to cover.
This month we started paying $150 toward my wife’s student loan. The minimum payment is $65. We increased the amount after paying off our car loan. $150 is a comfortable amount we decided on during our annual family planning conference. It is not a stretch goal. As we have extra savings build up we do make additional payments. The Income-Based Repayment (IBR) for my loan is $0 until we recertify. We must recertify by March 31, and we plan to do so this month since we have already filed taxes.
Underemployment. I had two interviews for other positions within my company. I have not had any interviews outside of my current company. With the new baby and taking time off, neither position is the right fit for my family at this time. I will continue to seek promotion opportunities within my company and outside positions allowing me a return to IT Help Desk or Java Programming.
Credit cards. The credit card balances represent various recurring bills and other spending. All of the cards are setup to automatically pay the full balance prior to the due date.
Retirement. The balance shown is an old number from my wife’s account through a previous job. Her account is under a plan through one company but is managed by another. We have been having trouble getting the online access setup through either company. Each says the problem is with the other company.
I am registered for my 401(k). We currently do not contribute to this account. We have been waiting until after the baby is born to decide how much or if now is the right time to contribute. The other option would be to pay off the student loans first. We have to decide how comfortable we are with the student loan debt. In the past we have chosen to pay down debt over contribute here. The student loan is the first time the debt interest rate will be lower than an expected 6% return.
Insurance. Both my wife and I have life insurance, with a premium of $27 per month. Our belongings are covered under the homeowner policy where we stay, cost paid by family. We have confirmed that our belongings are covered in this arrangement. We track our home inventory through ITrackMine.com.
We have car insurance through the same place as my wife’s life policy and the homeowner policy. We are looking at decreasing the car insurance levels once we have enough saved to replace the car, with a cost of $80 per month. We currently have no heath insurance for myself. My wife is covered under state pregnancy for two months after our daughter was born. Both children are covered under state children coverage. I do not purchase extended warranties.
I strongly view insurance as a gamble against myself. In discussion, the “What if…?” always comes up.
- “But you’d be devastated financially is something were to happen.” The average use of insurance is less than the cost of insurance and I’d rather self-insure. So when something happens i’ll have enough to cover the bill. Odds are that nothing will actually happen. I’ll then have this savings for use elsewhere. It might hurt, but not to the point of financial ruin.
- “What about peace of mind?” I don’t stress over these things. Some might, not me.
- “What about protection?” Eating right and exercising defensive driving are protection. Insurance does not protect. It is part of the clean-up crew. Sometimes a clean-up crew
is a good thing to have handy. But to me it is not a need.
Feedback from Neal
I understand how you feel. The last thing you need right now is an extra expense. However, I must say that life insurance is a basic foundation of financial responsibility. In my mind, everyone owes it to their family to take a hard look at their own mortality. If you read my story, you’ll know why I feel this way.
There is no way of knowing how long you are going to live. If your family depends on you financially, I don’t see how you can ignore this. I have seen a number of families destroyed because the major bread earner died prematurely. I urge you with all earnestness to first calculate how much life insurance you need and then look into obtaining inexpensive term life insurance. I think you’ll find that it costs much less than you imagine.
With all due respect, the same argument applies towards health insurance. An unexpected illness could potentially devastate your family from a financial perspective. These are just the facts of life and not subject to opinion.
I strongly suggest that you do whatever it takes to obtain health and life insurance for your family.
Updated July 5, 2013 and originally published February 28, 2013.