If I had and how to spend my life insurance

If I had… & How to Spend My Life Insurance

Periodically, I like to run through what I would do with a windfall. Tomorrow is PFD Day and we’ll be receiving $5,110 overnight. In celebration, here’s what I would currently do:

If I Had $5,000

(Or $5,110) in this scenario. In case you forgot, we tithe 10% of all increase. So, our PFD amount left after that is $4,599. With this money, we will be putting $1,600 extra toward our mortgage (on top of the extra $1500 we’ve been putting toward it the past few months) bringing our mortgage balance under $60,000 (I’m already looking forward to the October Plan Update!). The other $3,000 will go toward my Roth IRA which I hope to max out with the other $2,500 by the end of the year.

If I Had $10,000

The actual amount of the PFD was supposed to be $2,052ย a person but because our state doesn’t currently have a sustainable budget, the Governor vetoed part of the PFD. Had that not happened, we would have gotten $10,260 (because there are five of us) which is closer to what we got last year. If we had gotten the full amount, I would have put $1,600 toward our mortgage like we’re doing, and then $5,500 to max out my Roth IRA and $2,000 toward Mr. T’s IRA leaving us with only $3,500 needed to max both out! Alas.

If I Had $50,000

There’s no relating to a windfall this large. It will most likely never happen, but it’s fun to mentally decide what I WOULD do. I would max out Roth IRAs for both 2016 and 2017 (waiting until January to max out the other two, obviously). That would be $22,000. The rest I would put right toward the mortgage. That would bring my mortgage balance to around $40,000!

If I Had $100,000

With J$’s thoughtful post on how his wife should spend his life insurance money, I’ve been thinking a lot about that. If I died, since I make very little money comparatively, we set it up for Mr. T toย only get a $100,000 payout. I would advise him to pay off the mortgage and throw the other $30,000 into our investments. While we’re not financially independent yet, having no mortgage will help him get there faster. I’ve already set up his paychecks to max out his 401k. If he chooses to continue at his current job after I’m gone, his savings rate will continue to be high (though my paycheck will be lacking… obviously, since I’m dead and all). If he chooses to leave his job to take care of the kids and venture into entrepreneurship, he’ll have a paid-off home and his necessary bare minimum expenses will be low.

If I Had $500,000

Mr. T’s life insurance policy is $500,000. If Mr. T died (which he’s been informed is not allowed), I would pay off the mortgage and put the rest of the money in our investments. This would put us up to around $550,000 in investments and significantly lower expenses. Withdrawing 4% each year ($22,000), and adding my $15,000-ishย annual income, we could make things work. Eventually, I would have to increase my income to be able to save for complete financial independence and some money for the kiddos for the future, but this amount would set us up for awhile to get us through the first few years of adjusting to being a single mom. (Again, please don’t die Mr. T.)

If I Had $1,000,000

I’d be rich. (You saw it coming.)

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24 Comments

  1. What would you do with the money if you couldn’t save or pay off debt with it? I tried to ran that thought experiment with all the money I’d put on my student loans. It was an icky feeling (after accounting for all the sweet traveling) I’m a saver, what can I say?

    Happy PFD Day!!

    • MaggieBanks

      If I was *forced* to use all the money, I’d obviously have to take the kids out of school because I would have just purchased a million plane tickets! ๐Ÿ™‚ But, in the end, I’m a saver too. I’d rather purchase my future freedom!

  2. Britt

    This is so fun! I’ll have to think about it for us. J$’s post really inspired me to sit down with my husband and go through our finances…he has been thrilled to let me run the show and so would have no idea where to look/what to do without me.

    A friend of mine was recently telling me how her husband showed her the list of all the logins they have, the balances, etc, and how it was filed under “I” for “Investments”. She asked him to move it to “D” for “Death”…because the only way she’d ever look at it again was if he died! haha!

  3. It sucks to think about these things, but you really can’t help it, right? I have a lot of life insurance as the breadwinner (over 100K). He would use it to pay off debt, and then invest in our rental property. He would have to work at least part-time, but rental income would be really helpful for him supporting the family by himself, while spending time with the kids.

    I recently asked Mr. Smith, if something happened to me, whether he would figure out how to post something on my blog to let everyone know what happened to me. He just looked at me like I was crazy :/

    • MaggieBanks

      Ha ha ha. I’m not sure Mr.T would do anything like that either. And also, he decided he doesn’t want to plan for my death… so I wrote out in this post what he should do and then he can decide if he wants to work or not… I hope to at least not die until we hit FI! ๐Ÿ™‚

  4. I was thinking about you guys when I read the PFD was getting halved this year – ouch! Stupid low oil prices…

    Ahh yes, the life insurance post… We discussed this when Mrs. SSC quit, since her life insurance was through her company. I had her on my plan for me getting 3x my salary if she croaked, but then I’d be in charge of finances and things would probably go downhill quickly. Yipe!

    If I croak, she’ll effectively get 5x my salary through basic life and some additional AD&D coverage, so yeah she should be pretty set…

    That brings me to our own version of our list of where our assets are stored, which banks, accounts, etc… and probably not the login info, however, that should probably be added too. I figure in the event of her death, I’ll be paying lots of late fees the first few months trying to figure out what bills come from what account, and what she paid by real written check… eyeroll…

    We mainly started the list in case we both died, so her parents or brother would know where our $$ is for the kids sake. Plus, any sentimental stuff like one of my banjos that came from a cool trip with my dad, and a guitar, and dulcimer that came from my grandparents. Stuff like that so there isn’t a fire sale of assets willy nilly and any possible heirloom-ey things get sold.

    • MaggieBanks

      Yes, ouch to the PFD being halved… but the legislature needs to come up with an actual budget plan! I mean, cutting the PFD in half hurts low income and bush families way more than middle class. I’m cool with the proposed 1.5% income tax. The problem is that it’s so hard to get traction to go from 0 tax to a small tax! Leaving 0 tax is a big step!

      As for late fees… we caught a glimpse of that possibility after I had Lui and struggled massively with my health. Mr. T didn’t know how or when or what to pay and we paid a few late fees. If I die, it will be so much worse! ๐Ÿ™‚

  5. It sucks to have to think about these things but you gotta plan for the unlikely events right? We purchased 25 year term life insurance before Baby T1.0 was born… about 3 years ago. We figured we probably won’t need as much coverage after 25 years. Haven’t really thought about what we’d do with that money if one of us were to pass away though….

    • MaggieBanks

      We have 20 year terms. I’m with you there. ๐Ÿ™‚ And I’m sure what we would do with the money changes drastically every few years, so it’s good to think about this often.

  6. I love running different scenarios through my head. Although I generally use a lottery win vs. life insurance payouts. =) Like if I had 1-3 million, how would I want to spend my time? What work would I find meaningful? What projects seem fun? Are there more things I would pay others to do? (housekeeping! hands down, no questions asked.)

    • MaggieBanks

      I ask those questions all the time with Mr.T to help him figure out those answers as well… and it’s really hard for him to think about money not being a factor when it currently IS a factor! (also, our chances of winning the lottery are exactly 0 since we don’t play!)

      • Oh boy, Mr. Mt HATES the lottery.If were entirely up to him we would never buy a ticket. Entirely up to me, maybe once a year. So we have compromised and bought about 3 tickets in 14 years. =) I find it easier to come to an honest answer when money isn’t a factor. Then after I find what seems most honest, try to figure out how to add the money piece back in. =)

  7. Bah da bing, bah da bang!

  8. If I were handed a million bucks, Mrs. G and I would move to Alaska and buy a house in Montana so we could go south for the winter.

  9. Alaska49

    Ah, under your $5,000 plan…putting your kids’ PFD into your IRA? Someday they may add up all those PFD’s and wonder where their money is…and if they read your blog, they might add in the missing compounding interest….and come a calling.

    • MaggieBanks

      Good point. I’ve mentioned before that we have a spreadsheet of all of the kids’ PFDs and when they start earning any money, we plan to open up Roth IRAs in their names and funnel them back to them. But yes, we are stealing their interest. I’ll call it a “parent tax” ๐Ÿ™‚

  10. I think my favorite thing about getting closer to fully FI is that the amount I’d need at this point to feel completely set keeps getting smaller and smaller. Less than five years ago, we’d say that we could retire if we had a million dollar windfall, but now our “we could retire today” number is a lot lower… I mean, not that we’d TURN DOWN a million bucks. ๐Ÿ˜‰ We could visit all our friends often with that kind of extra money… and give a LOT to charity! I hope you’ll redo this post every year or so and compare what each amount would do for you at that point in your journey!

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