The 5 Things Single Parents Need to Consider about Life Insurance

August 28, 2017 &• 5 min read by Abby Hayes Comments 0 Comments

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As a parent, one of the scariest things to think about is what your children will do if something happens to you someday. This can be even scarier if you’re a single parent without a partner to fall back on.

But here’s the thing: you are the sole provider for your children. It’s even more important that you take time to consider all the future possibilities. Here’s what you need to know about life insurance, including how much coverage to get and how much it’s likely to cost.

How Much Coverage Do You Need?

The biggest life insurance question is usually about how much coverage you need. There are all sorts of rules of thumb for this issue. Some say you need seven times your current annual income, while others say more or less.

But how much coverage you need really depends on how the benefit would need to be used if you were to pass away. Ultimately, this depends on a few factors, including the following:

  • How old your children are right now
  • Who would care for them if you were to pass away
  • What that caregiver would need to be able to care for your children
  • How much debt you currently have
  • Whether or not you want to pay for your children’s college costs

Let’s break this down, then, into the five things you’ll need to consider to get the most out of your life insurance policy.

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1. Talk to Potential Caregivers

If you don’t already have plans for alternative caregivers for your children, now is the time to make them. Your life insurance decisions will largely hinge on the circumstances of those who would care for your children in the event of your death.

For instance, let’s say you have four kids who would live with your parents if you passed away. If your parents have already downsized into a retirement home, they’d probably need to move to care for your children. In this case, you need to account for their additional moving and housing expenses in your life insurance policy. If they’ve already retired, you may need to consider the other ways that caring for your children would impact their ability to cover their own living expenses.

But what if you have only one child who would move in with family friends if you passed away? If your friends already have a few kids of their own, they may not need to move or add on to their home to accommodate your child. In this case, you may not need quite as much life insurance coverage.

It’s a good idea to have an up-front conversation with potential caregivers. What would they need in order to care for your children appropriately? These are difficult conversations to have, but they’re an essential part of this equation.

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2. Think about Your Kids’ Needs

How much insurance you require also depends on your kids’ ages and needs. If you have younger children, you’ll need more coverage—and you’ll need it to last longer. If your kids are older, though, you can probably purchase a shorter policy with less coverage.

Beyond just their ages, you’ll want to consider your kids’ particular needs as well. Are they currently attending a private school that you’d want them to continue attending? Or maybe you have a child with special medical needs. Make sure your policy is large enough to cover those costs.

If you want to fund your children’s college attendance with your death benefit, you’ll need quite a bit more coverage. If you can’t afford to cover college tuition right now, you could also look at college funds as the icing on the cake. In a couple of years, if you’re in a better place, consider upping your policy or adding a second one to cover these costs.

3. Consider Your Current Financial Situation

Even those without children should have enough life insurance coverage to tackle leftover debts and other end-of-life expenses, but it can be even more important for single parents. You’ll want to be sure your children aren’t dealing with a burden of debt while also grieving your loss. If possible, you’ll want to cover the full amount of your debt so they don’t need to.

Keep in mind the costs of end-of-life services, like a funeral service and burial, as well. These can run as much as $10,000 and be a real financial burden if you forget to plan for them yourself.

4. Add It All Up, and See What You Need

Now it’s time to determine how much total life insurance coverage you need. Here’s an example, based on the recommendation that you cover seven times your annual salary.

Sherry is a single mom of a four-year-old and a ten-year-old. She makes about $40,000 per year. If she passed away, her parents would care for the kids, and they’d need to move into a larger home to do so. She has about $25,000 in debt, outside of her mortgage, and she would want to fund both kids’ college funds with her life insurance. Here’s where she stands:

  • Income Replacement: $280,000
  • Additional Housing Costs: $50,000
  • Debt: $25,000
  • End of Life Expenses: $10,000
  • College Funds: $200,000
  • Total Life Insurance Needs: $565,000

That sounds like a lot, right? Before you decide you can’t afford insurance, though, take the next step.

5. Check Out Term Life Insurance Coverage

Over half a million dollars in life insurance coverage seems like a lot, but many people actually overestimate the actual costs of such insurance, especially for healthy, relatively young individuals.

The key is to get term insurance (unless you have a good reason to have more expensive whole life insurance coverage) for only as long as you need it. The longer your term, the more expensive your coverage. Sherry should probably have a 15-year policy, which would cover her until her children are both adults. And if Sherry is in good health, a policy like this could cost well under $50 per month. That’s much better, right?

Once you know how much coverage you need, it’s time to shop around. Plenty of online quoting systems can get you an estimate on your costs in just a few minutes.

These steps aren’t fun to think about. But having an affordable life insurance policy you know will protect your loved ones is worth a bit of discomfort. Check out our Personal Finance Learning Center to ensure you’re on the right track to keep your children safe and secure when you’re no longer here.

Image: Juanmonino

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Mvelopes Review: Digitize the Cash Envelope Method With This App

The cash envelope budgeting method can be a very effective way to control your spending.

The premise is simple. You come up with spending limits for your variable expenses, like groceries, eating out or entertainment. Next, you fill up envelopes with cash to match what you’ve budgeted for each category.

As you shop throughout the month, you can only spend the amount of money in your envelopes. Once you’ve run out of cash, you’ve got to freeze spending until it’s time to fill the envelopes again.

There’s one significant flaw in this budgeting method though: What if you don’t shop with cash? Many people opt for online shopping or use a debit or credit card rather than dollars and coins.

Fortunately, there are ways to adapt the cash envelope budget for cashless shoppers. One of the solutions is to use a budgeting app, like Mvelopes.

In this Mvelopes review, we’ll explain how this app works to help you keep your spending in check.

What Is Mvelopes?

Mvelopes is a budgeting app from Finicity, a fintech company owned by Mastercard. It’s based on the cash envelope system, so all of the categories you set up in your budget are essentially your digital envelopes.

Mvelopes syncs to your financial accounts, so whenever you pay a bill, shop online or swipe your debit card, that transaction shows up in the app. The app uses bank-level encryption to keep your information safe.

Once you assign the transaction to its appropriate envelope, you’ll automatically see how much money you have left to spend in that category. And if you do happen to use cash for something, you can manually enter that info in the app.

How to Get Started with Mvelopes

You can download the Mvelopes app for your Apple or Android mobile device — or you can create an account and manage your money straight from your computer.

Mvelopes offers three tiers of service. Mvelopes Basic costs $5.97 per month or $69 per year and lets you set up your budget by syncing to all your financial accounts. The next step up is Mvelopes Premier, which costs $9.97 per month or $99 per year and includes access to the Mvelopes Learning Center and Debt Reduction Center.

The Mvelopes Learning Center has online video lessons on topics like mastering your spending, creating an emergency fund, insuring your future, home buying and how to have stress-free holidays. With the Debt Reduction Center, you get support to create a tailor-made debt payoff plan.

The app’s top tier of service is Mvelopes Plus. This plan connects you with a real-live personal finance trainer for one-on-one virtual sessions four times a year. You’ll also get higher priority customer service support. Mvelopes Plus costs $19.97 a month or $199 a year.

Although there is no free version of Mvelopes, you can sign up for a 30-day free trial of Mvelopes Premier — the app’s most popular option — to test out the service with no financial commitment.

The Pros and Cons of Mvelopes

Mvelopes can sync with over 16,000 financial institutions, so most users can track their spending with minimal effort. Keeping your spending in check means you can free up more money to go toward saving or debt.

According to the company, Mvelopes has helped users save an average of $6,175 and pay off an average of $17,425 of debt.

One disadvantage of this app, however, is that it’s not free, like the budgeting apps Mint or Clarity Money. Also, if you’re looking for a tool that tracks more aspects of your financial life, such as your net worth and where you stand with your investments, you might want to consider an app like Personal Capital.

Who Is Mvelopes For?

The Mvelopes app is a great option for fans of the cash envelope method who are looking to digitize their money management.

It is also a good choice for people looking to nix overspending, because the app keeps you up-to-date with how much funds you have left to spend in each budget category.

Additionally, Mvelopes can help you boost your personal finance knowledge via online courses or pay down debt with a tailored payoff plan.

By signing up for the free 30-day trial, you’ll have a month to decide whether Mvelopes is the right choice for you.

Nicole Dow is a senior writer at The Penny Hoarder.

Source: thepennyhoarder.com

What You Need to Know About Budgeting for Maternity Leave

Follow these four steps to financially prepare for your maternity leave.

Prepping for a new baby’s arrival might kick your nesting instinct into high gear, as you make sure everything is just right before the big day. One thing to add to your new-baby to-do list is figuring out how to financially prepare for maternity leave if you’ll be taking time away from work.

Lauren Mochizuki, a nurse and budgeting expert at personal finance blog Casa Mochi, took time off from work for the births of both her children. Because she had only partial paid leave each time, she says a budget was critical in making sure money wasn’t a source of stress.

“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time,” Mochizuki says.

But the question “How do I budget for maternity leave?” is a big one. One thing’s for sure—the answer will be different for everyone, since not everyone’s leave or financial situation is the same. What matters most is taking action early to get a grip on your finances while there’s still time to plan.

Before you get caught up in the new-baby glow, here’s what you need to do to financially prepare for maternity leave:

1. Estimate how long you’ll need your maternity budget to last

To financially prepare for maternity leave, you need to know how long you plan to be away from work without pay.

The Family and Medical Leave Act (FMLA) allows eligible employees up to 12 weeks of job-protected, unpaid leave from work per year for certain family and medical reasons, including for the birth of a child. Some employers may also offer a period of paid leave for new parents.

The amount of unpaid maternity leave you take will determine the budget you’ll need while you’re away.

When estimating how long you’ll need your maternity budget to last, Mochizuki says to consider how much unpaid leave you plan to take based on your personal needs and budget. For example, you could find you’re not able to take the full period offered by FMLA after reviewing your expenses (more on that below) and how much you have in savings.

Even if your employer does offer paid maternity leave, you may decide to extend your time at home by supplementing your paid leave with unpaid time off, Mochizuki says.

Keep in mind that despite all of your budgeting for maternity leave, your health and the health of your baby may also influence how much unpaid time off you take and how long your maternity leave budget needs to stretch.

As you’re financially preparing for maternity leave, make sure your spouse or partner is also considering what benefits may be available to them through their employer. Together you should know what benefits are available for maternity or paternity leave, either paid or unpaid, and how to apply for them as you jointly navigate the budgeting for maternity leave process. You can then decide how to coordinate the amount of time each of you should take and when that leave should begin.

Contact your HR department to learn about your company’s maternity leave policy, how to apply for leave and whether there are any conditions you need to meet to qualify for leave. Ask if you’re able to leverage sick days, vacation days or short-term disability for paid maternity leave.

2. Babyproof your budget

When budgeting for maternity leave, make sure you review your current monthly budget to assess how budgeting for a new baby fits in.

In Mochizuki’s case, she and her husband added a category to save for maternity leave within their existing budget for household expenses (e.g., mortgage, utilities, groceries).

“We treated it as another emergency fund, meaning we had a goal of how much we wanted to save and we kept working and saving until we reached that goal,” Mochizuki says.

Figure out what new expenses might be added to your budget and which existing ones might reduce to financially prepare for maternity leave.

As you financially prepare for maternity leave, consider the following questions:

  • What new expenses need to be added to your budget? Diapers, for instance, can cost a family around $900 per year, according to the National Diaper Bank Network. You may also be spending money on formula, bottles, wipes, clothes and toys for your new one, all of which can increase your monthly budget. And don’t forget the cost of any new products or items that mom will need along the way. Running the numbers with a first-year baby costs calculator can help you accurately estimate your new expenses and help with financial planning for new parents.
  • Will any of your current spending be reduced while you’re on leave? As you think about the new expenses you’ll need to add when budgeting for maternity leave, don’t forget the ones you may be able to nix. For example, your budget may dip when it comes to commuting costs if you’re not driving or using public transit to get to work every day. If you have room in your budget for meals out or entertainment expenses, those may naturally be cut if you’re eating at home more often and taking it easy with the little one.

3. Tighten up the budget—then tighten some more

Once you’ve evaluated your budget, consider whether you can streamline it further as you financially prepare for maternity leave. This can help ease any loss of income associated with taking time off or counter the new expenses you’ve added to your maternity leave budget.

Becky Beach, founder of Mom Beach, a personal finance blog for moms, says that to make her maternity leave budget work—which included three months of unpaid leave—she and her husband got serious about reducing unnecessary expenses.

Find ways to reduce costs on bills like insurance and groceries to help save for maternity leave.

Cut existing costs

As you budget for maternity leave, go through your existing budget by each spending category.

“The best tip is to cut costs on things you don’t need, like subscriptions, movie streaming services, new clothes, eating out, date nights, etc.,” Beach says. “That money should be earmarked for your new baby’s food, clothes and diapers.”

Cutting out those discretionary “wants” is an obvious choice, but look more closely at other ways you could save. For example, could you negotiate a better deal on your car insurance or homeowner’s insurance? Can you better plan and prep for meals to save money on food costs? How about reducing your internet service package or refinancing your debt?

Find ways to earn

Something else to consider as you budget for maternity leave is how you could add income back into your budget if all or part of your leave is unpaid and you want to try and close some of the income gap. For example, before your maternity leave starts, you could turn selling unwanted household items into a side hustle you can do while working full time to bring in some extra cash and declutter before baby arrives.

Reduce new costs

As you save for maternity leave, also think about how you could reduce expenses associated with welcoming a new baby. Rather than buying brand-new furniture or clothing, for example, you could buy those things gently used from consignment shops, friends or relatives and online marketplaces. If someone is planning to throw a baby shower on your behalf, you could create a specific wish list of items you’d prefer to receive as gifts in order to offset costs.

4. Set a savings goal and give every dollar a purpose

When Beach and her husband saved for maternity leave, they set out to save $20,000 prior to their baby’s birth. They cut their spending, used coupons and lived frugally to make it happen.

In Beach’s case, they chose $20,000 since that’s what she would have earned over her three-month maternity leave, had she been working. You might use a similar guideline to choose a savings goal. If you’re receiving paid leave, you may strive to save enough to cover your new expenses.

Setting a savings goal and tracking expenses before the new baby arrives is an easy way to save for maternity leave.

As you make your plan to save for maternity leave, make sure to account for your loss of income and the new expenses in your maternity leave budget. Don’t forget to factor in any savings you already have set aside and plan to use to help you financially prepare for maternity leave.

Once you’ve come up with your savings target, consider dividing your maternity savings into different buckets, or categories, to help ensure the funds last as long as you need them to. This could also make it harder to overspend in any one category.

For instance, when saving for maternity leave, you may leverage buckets like:

  • Planned baby expenses
  • Unexpected baby costs or emergencies
  • Mother and baby healthcare

“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time.”

– Lauren Mochizuki, budgeting expert at Casa Mochi

Budgeting for maternity leave—and beyond

Once maternity leave ends, your budget will evolve again as your income changes and new baby-related expenses are introduced. As you prepare to go back to work, review your budget again and factor in any new costs. For example, in-home childcare or daycare may be something you have to account for, along with ongoing healthcare costs for new-baby checkups.

Then, schedule a regular date going forward to review your budget and expenses as your baby grows. You can do this once at the beginning or end of the month or every payday. Take a look at your income and expenses to see what has increased or decreased and what adjustments, if any, you need to make to keep your budget running smoothly.

Budgeting for maternity leave takes a little time and planning, but it’s well worth the effort. Knowing that your finances are in order lets you relax and enjoy making memories—instead of stressing over money.

Discover Bank, Member FDIC

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How We Paid Off Over $45K of Debt in 11 Months

This post may contain affiliate links. Please read my disclosure for more information.

It seems pretty normal to me now but people still drop their jaws when I tell them we’ve paid over $45K on our loans in less than a year.

We still have a year to go and most days I have mixed emotions of accomplishment for what we’ve done vs. annoyance for how far we have to go.

UPDATE: As of August 31, 2017, Travis and I are STUDENT LOAN FREE! We paid off $77,646.54 in 23 months!

We’ve made conscious decisions to hold off on things like buying a house, going on trips, and even getting a couch that’s not covered in stains (all attempts to clean only make it worse.)

I didn’t agree to this at first but over time I’ve learned it’s necessary for our journey to get out of debt as quickly as possible. Don’t feel like you have to go vegan straight from an all McDonald’s diet.

Wade into it with these foundational practices and build your thriftiness over time. Make the commitment and I promise you will reap the rewards, and they will be sweet comfy industrial style brown leather rewards.

1. Read

Or listen to Dave Ramsey’s book The Total Money Makeover. Regardless of what you think about Dave’s philosophies the man has the market nailed on the psychology of spending.

Travis and I read this as part of our premarital counseling and it was a game changer.

I was in way too over my head to figure out where my money should go based on interest, investments, credit scores, etc. I needed a simple plan I could follow and he offered that simplicity. The baby steps are the map we’re using and they do work if you commit to them.

2. Budget

He must be using his favorite budgeting app!

I won’t harp too much on budgets but it’s the most important thing to getting out of debt and winning with money. None of these good intentioned suggestions are worth anything without a plan for telling your money where to go.

If budget sounds too negative you can refer to it as something else, like a Monthly Cash Flow Plan. It doesn’t matter what you call it just make one and stick to it.

You won’t be perfect and you’ll never have the perfect budget so make it as easy as possible for yourself by downloading an app like Mint to track card purchases in real time or EveryDollar if you’re a cash-only spender.

3. Buy Secondhand

You know how I feel about the amazing wallet and environmental benefits of buying clothes secondhand, but we buy just about everything else used as well. I love ThredUp for clothes and we’re avid pawn shop browsers. They’re always willing to negotiate on price. We recently got a $100 indestructible Bluetooth speaker for $30!

We got all our furniture from Craigslist and OfferUp and we browse Goodwill whenever we have free time to see what goodies they have.

We even do it with food. My mom works in cafeterias and catering and will offer us leftovers whenever they’re available. This obviously isn’t an option for everyone but if you know someone with extra food don’t be shy to ask and offer to pick it up on site. It prevents waste and cuts down your grocery bill.

4. Eat at Home

me in the kitchen.

We have a $50 grocery budget per week and we live very comfortably off that. I plan my meals, make a strict grocery list, and we switched to shopping at Aldi.

We budget ourselves a few meals per month to eat out with friends. We hate to pay full price anywhere so a few places we use to save on food include:

  • Sites like Restaurant.com for dining deals.
  • Groupon and LivingSocial for deals on dining and activities.
  • Apps like ibotta and Checkout51 to save at grocery stores and other big box retailers.
  • Mystery shops at bars and restaurants.
  • Shopping through Rakuten when grocery shopping online. (I also never get a Groupon without getting Ebates cash back!)

Spoiler alert: It’s much easier to get to know people at home over a crockpot dinner and a bottle of wine than a crowded restaurant with a live band. Married or single, eating at home is not as time-consuming and boring as I thought it’d be.

These are just a few of the money saving tactics we used. I actually have a list of 200 frugal living tips to spark your imagination on how to live a more frugal life!

5. Side Hustle

Sometimes there’s just nothing left to squeeze out of the budget to pay down debt. The quickest way out of debt is increasing your income. I know that it seems impossible to squeeze more into your already busy life and it is no picnic, it’s exhausting.

But the more you make now, the quicker you go from rice and beans to steak dinners (I’m vegetarian though so I’ll stick with the beans.)

I don’t recommend minimum wage soul-sucking side jobs (unless it’s over the holidays when you can make bank) I mean hustles. Drive Uber during peak hours, deliver pizzas on nights and weekends and rent your house/room out on Airbnb.

Use the talents you already have to freelance some work (try Facebook or fiverr to advertise.) Bringing in an extra $1000 a month now will change the rest of your life.

They paid of $45K of debt in 11 months! Holy wow! Me next please!

They paid of $45K of debt in 11 months! Holy wow! Me next please!

<img data-attachment-id="4826" data-permalink="https://www.modernfrugality.com/paid-off-45000-debt-11-months/mf-how-this-family-paid-off-45000-in-11-months-on-average-incomes/" data-orig-file="https://i0.wp.com/www.modernfrugality.com/wp-content/uploads/2016/09/MF-How-This-Family-Paid-off-45000-in-11-Months-on-Average-Incomes.jpg?fit=600%2C900&ssl=1" data-orig-size="600,900" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"}" data-image-title="Want to pay off debt quickly?" data-image-description="

If you want to pay off your debt quickly, read this. This family paid off over $45,000 in just under 11 months and show you how to do it in your life. #payingoffdebtquickly #payingoffdebtfast #payingoffatonofdebt #payingoffstudentloandebt

” data-medium-file=”https://i0.wp.com/www.modernfrugality.com/wp-content/uploads/2016/09/MF-How-This-Family-Paid-off-45000-in-11-Months-on-Average-Incomes.jpg?fit=200%2C300&ssl=1″ data-large-file=”https://i0.wp.com/www.modernfrugality.com/wp-content/uploads/2016/09/MF-How-This-Family-Paid-off-45000-in-11-Months-on-Average-Incomes.jpg?fit=400%2C600&ssl=1″ loading=”lazy” width=”400″ height=”600″ data-pin-title=”Want to pay off debt quickly?” data-pin-description=”If you want to pay off your debt quickly, read this. This family paid off over $45,000 in just under 11 months and show you how to do it in your life. #payingoffdebtquickly #payingoffdebtfast #payingoffatonofdebt #payingoffstudentloandebt” src=”https://bariatrx.com/wp-content/uploads/2021/02/how-we-paid-off-over-45k-of-debt-in-11-months.jpg” alt class=”wp-image-4826″ srcset=”https://bariatrx.com/wp-content/uploads/2021/02/how-we-paid-off-over-45k-of-debt-in-11-months.jpg 400w, https://i0.wp.com/www.modernfrugality.com/wp-content/uploads/2016/09/MF-How-This-Family-Paid-off-45000-in-11-Months-on-Average-Incomes.jpg?resize=200%2C300&ssl=1 200w, https://i0.wp.com/www.modernfrugality.com/wp-content/uploads/2016/09/MF-How-This-Family-Paid-off-45000-in-11-Months-on-Average-Incomes.jpg?w=600&ssl=1 600w” sizes=”(max-width: 400px) 100vw, 400px” data-recalc-dims=”1″>

Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.

Source: modernfrugality.com