{2:00 minutes to read} Many couples who are going through a divorce are struggling to find a way to live separately on the income that was previously supporting only one household. This often means reviewing their expenses in order to find ways to either cut back or eliminate some of them.
When I am doing this the discussion often starts by separating needs from wants. While food, clothing, and shelter are needs, cable TV, internet, cell phone plans, and entertainment expenses fall into the wants category.
One expense that is often overlooked is the cost of life insurance. While this might not be a large expense for many couples, cutting back on even a small expense can often be the difference between making things work or having to sell the house or some other asset.
For example, I was recently working with a couple who were trying to keep their house until the children finished high school. When I went through her expenses, Anna* said she had purchased some additional life insurance through her employer that increased her death benefit from $100,000 to $450,000. In looking at her paystub, she informed me that it “only” cost her $36 per pay period.
She was quite surprised when I pointed out that, since she was paid 26 times per year, this “small” cost was really $936.00 per year. And when we looked further we determined that the $100,000 policy from her employer, which cost her nothing, was more than enough to cover her share of the expenses needed to raise their youngest child until he was emancipated. Faced with these facts, she quickly realized that she could drop the additional coverage.
I am certainly not saying that you should not keep life insurance in place beyond what your dependents need if you wish to leave a legacy. Just make sure that doing so does not prevent you from meeting your goals today.
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