Editor’s Note: As part of a special project on The PerkStreet Blog, we’re offering a free question and answer columns on Saturdays with Customer Columnists Clint and Katy Davis of Davis Coaching. If you have a question you’d like to submit to get advice from these financial coaches, email it to firstname.lastname@example.org.
Dear Clint and Katy,
My wife and I both work, and we just bought our first house for $160,000. I make $55,000 a year and she makes around $35,000. We’ve been receiving a lot of mortgage life insurance offers in the mail since buying the house. They claim they will pay off the mortgage if either of us dies. Do you think we should take advantage of these offers?
Short and simple… No! These types of offers are horrible unless for some reason you’re not insurable. Most of these mortgage life insurance policies are much more expensive than term life insurance.
You and your wife both need to buy 8 to 10 times your annual incomes in good, level a term life insurance policies. These policies are very inexpensive and will take care of you, and the house, for a lot less if the unthinkable happens. I’m glad you recognize the need to be protected. Just make sure you do it the right way. Thanks for the question!
Dear Clint and Katy,
I’ve been following your blog posts for a while now and I love your plan. I have one question though: Should I catch up on some past due bills before I save up my $1,000 starter emergency fund? Thanks for all you do!
Definitely! First, get caught up or make payment arrangements for each account you’re behind on. Make sure to take care of your necessities first – food, shelter, clothing, transportation, utilities, etc… After those are paid each month, use any extra money you can squeeze out of your budget to get current on any credit cards or other debt you have. Once you get caught up, then you can launch your Debt-Free plan.
You’ve already mentioned the first step in your plan, which is to save $1,000 as a starter, Emergency Fund. Your next step will be to pay off all your debt using the Debt Snowball plan. From there you’ll begin to invest 15% for retirement, save for your children’s college fund, pay off your home early and begin to create tremendous wealth for yourself. If you stick to the plan, not only are you securing your family’s future for generations, but you can help others and impact your community in a major way.
This journey is all about taking control of your money, but it’s also about taking control of your life. Now, at the very beginning, start thinking about how you want your life to look once you’ve cleaned up this debt mess. What does your ideal life look like? When you can define that motivation, it will carry you through as you work step-by-step to make it a reality. Define your goal – make your plan – take Massive Action – change your entire life! I know you can do it!