Whole Life Insurance: Should I Cancel It and Switch to Term Life? | 470

0:00Today, we're bringing you real life stories and lessons from our private coaching sessions. If our clients are dealing with it, chances are you are too. So we're breaking it down to help you avoid the same mistakes, feel less alone, and walk away with some quick wins for your budget. Do you make good money but have nothing to show for it? Are you tired of living paycheck to paycheck? Do you have big dreams for your financial future? Do you want to get debt-free but you don't want to live on beans and rice? Or you don't want to give up those pumpkin spice lattes? Hey, it's okay if you don't already know how to budget or if you're using credit cards to get through the month.

0:31Hey, it's okay if you want to seem like you have your finances all together, or you're not on the same page with your spouse when it comes to finances. We know what you're doing probably isn't working, but guess what? You're in the right place. We're Shana and Vanessa. We're best friends, business partners, and master financial coaches trained by Dave Ramsey. We've been in business since 2019, helping hundreds of amazing people like you create budgets, get out of debt, stop living paycheck to paycheck, and know exactly what to do with their money. In this podcast, we'll share with you everything we know, plus everything we're working on with our clients so that you have the best chance at reaching your financial goals.

1:07We want to help you take the guesswork out of your budget, improve your marriages, and even bring your kids in on the conversation. We can help you no matter where you're at, whether you're the single mom who's never had$500 in her savings account or the millionaire who's paid off four real estate mortgages. And we're not going to shy away from the tough love. We'll tell you what you need to here and encourage you at the same time. This is the Financial Coaching for Women podcast. Here is a very basic lesson. We're not the first people to say this, but I had a new client start and she had a whole life premium in her budget.

1:41And her budget's really tight. We're having to figure some things out. And I think she knew when she came in that it was something that we need to talk about. And so we did. And so she's paying, and this is always the case, Whole life premiums are not cheap. They are never cheap. If you look at a term, you can have anywhere from like 20 bucks to like 100 bucks, depending on what's going on with your life and your health. But whole life is, I've never seen one less than$400 ever. And then it can go even higher depending on what your coverage is or whatever. And that is a lot of money for a lot of people.

2:11That's a huge chunk of their budget. And when it comes to whole life, it's not really worth it. We can get down to the nitty gritty of why it's not worth it. But in her case, she doesn't have that. And her whole life is not a good investment anyway, but you literally just don't have it. And then also, I'm going to tell you it's not a good investment. You don't have term. Then we would want you to get rid of it. And we did talk to her about getting rid of it and getting that money back into your budget. Then you can go start making progress. And then maybe you'll get back to the point where you could be, which is the whole premise of the whole life is you're sort of investing, right?

2:46We teach all the time, like, you don't have that money. We need you to get to the point where you actually can invest and invest consistently and on purpose. And we want you to do that on purpose on your own terms where you're making the money. And this is the case with hers. It always is the case. This is actually the best one I've seen personally. I don't know about you, Vanessa. But she had been paying since 2020, and she had paid in$26 ,000. And then when she went to go cash it out, she was going to get$13 ,000. I've actually seen it be way worse than that. It's actually only because it's been five years.

3:14That's probably why. And so she's going to get half of that. What that means is half of the money that she paid in, they invested, they made money on it. She could have been doing that. Imagine if she had been paying, saving$473 a month on her own in a high yield savings. Obviously, she would have$26 ,000 on her own. And then she would have more because she's collecting the interest. That's a big part. That's only a part, but that is a big part of why the whole life we're not for it. But it's also, you need to be doing stuff in the right order. And that is not always affordable. It's usually people that are, Dave says they're praying like a payday lender of the middle class.

3:52And that's what it is. It's not people that are trying to be crazy or whatever. They're just like scared or a lot of times they're single moms or something. And they want to make sure they're doing the right thing for their family. And they get sucked into these things. Anyway, I have more to say, but I'm going to pause. I have a lot to say too. So this will be fun. But it's interesting when somebody comes to us and they start listing out all their bills, they'll say a life insurance and they'll list$510 and I'll ask, is that whole? And they say, I don't know. And I'm like, I'm telling you that it is.

4:21In case you don't know, that is the price of a whole life insurance policy. And I have one client, it's actually her brother, her brother that sold her and her husband and her child, this whole life insurance policy. He's making, he told them he's making 30 % off of what their monthly premium is. That's going in his pocket. the rest is going to the company and they're not getting anything right now right because they're using it as a savings account so shana alluded to that the reason why they want you to pay into these is because they get the most on their return from whole life insurance policies and it is they're selling it to you like it's a savings account like an investment account it is absolutely not as the worst that you could do if you want to do that do it on your own but also like shana said you have to do it in order a lot of people come to us and they want to invest and And we're like, you can't.

5:12Look at, this is what your numbers are telling you. You absolutely cannot afford to invest right now. Let's pay off a little bit of your debt. Get your savings buckets in order so you don't go back into debt. And then we'll get the money available so that way you can be a good investor and a lifelong investor. But using a whole life insurance policy as a savings account or an investment account is not a thing. It's not good. All right, budget besties. It's time for some real talk. You don't need another budget. You need a budget system. Our simplified budget system is what you've been looking for.

5:43It's going to allow you to be bougie on a budget. You'll be able to easily set up a system that runs automatically and shows you exactly where your money is going. And it's going to give you permission to spend. Everybody loves that. Yeah. It's straightforward, pretty, and packed with walkthrough videos that break down the exact methods we use with our clients to get out of debt, set up a bills account, separate spending, build savings buckets, and end the paycheck-to-paycheck feel. If you're new to budgeting, this is the perfect way to jump in. And if you're already a budget nerd like us, you're about to meet your new obsession.

6:17This is the upgrade to your finances that you need right now. Yeah. So head on over to budgetbesties.com forward slash budget and grab yours. Now back to today's show. And so a lot of times what happens when we tell people to cancel them, go get a term policy and then they go talk to their advisor. Uh-huh. and they feel like, I don't want to lose the, in this case, the$13 ,000 that I put in that I'm not going to get back. Oh yeah, they'll make you feel really bad. Yeah. And what we have to say about that is you're going to continue to lose money and you're going to, in this case, go into debt because you can't literally afford to live.

6:53So not only are we paying the$473 ,000 that we're not seeing any return on at all, zero return. $13 ,000 when you paid$26 ,000 for five years, That's just, that's half. You got half of your money back. But not only that, but you're living outside of your means because you can't actually afford it and you're going into debt and it's just creating this terrible cycle versus cancel it, rip the bandaid. I know we don't love it, but stop it right now, pay off this debt, and then you can start putting$500 in your own savings account and become your own bank and your own insurer. This is what the point of term is.

7:27Insurance is. I only need this for a term. If I can put, I'm sure this woman can get probably a policy for 50 bucks a month maybe. If I can get a policy for 50 bucks a month and I get some of this budget cleaned up, and then I can put$450 in my own investment every month, I eventually... She's like double covered. And I eventually, once the term is up, I won't need insurance. Hopefully, I will have enough money in the bank to be my own insurance. I'll have enough money to pay off my own mortgage. I'll have funeral expenses covered. I'll have money set aside for my kids or whatever. That's the idea.

7:57But if you're doing the whole life, it robs you from that ability because it's taking so much money from you every month without giving you any money over or any interest on it. So I want to explain term life insurance really quick because Shana was talking about the end of the term and you should hopefully be your own bank and have everything funded. What that means is you're saying, okay, you're using a calculator. We have one, a retirement calculator in our budget system if you want to look at that. But it is basically saying, okay, in 20 years, I'm going going to have all the money that I need to support myself.

8:28So I no longer need this term insurance. That's what that's saying. And like the way that Shannon was explaining it at the end of the term, the goal, the idea is if, you know, you're still alive, right? Because that's what we're protecting. We're protecting just in case something happens within this timeframe. So after that timeframe, when you're still alive, I'm going to say when, so then you have all the money that you need to fund your life and fund your future, because that's what you've been preparing for. So that's what that means. You're literally, whether it's 10-year, 15-year, 20-year, 30-year, whatever, you're protecting that timeframe while you're saving up the money you need for after that.

9:03Yep. And so don't be afraid to, and like term is 20 years, 30 years, like Vanessa said. And then, so don't be afraid to rip this Band-Aid. We understand it's a little painful. We understand maybe you got scared into it. And then what we said about the order, remember, we want you to be bougie in the budget. We're not saying you can't do life and pay off debt, but we want you to understand if you are going into debt because you can't afford life because you're paying for something like this, that's not the plan. The plan would be let's pay off some of this debt, and then as soon as I feel like there's wiggle room, I feel like my savings buckets are good, let me start investing.

9:38Whenever you feel like it makes sense. We have lots of clients. They'll pay off all their credit cards, but they are not interested in worrying about paying off their cars, their mortgage early at that point in their life, maybe in the future. and then they would start investing and then they'd really start funding their savings bucket. So you can do that. It's just understand that's a lot of money and we're not for it. No, no. All right, so we hope that you loved this lesson from the session episode. If you have any questions, if any questions arose from this topic or both of these topics, just feel free to email us at hello at budgetbesties.com and we'll see you next week.

10:10If you're tired of feeling like your finances are all over the place and you're ready for a simple, set it and forget it way to budget, we have something special for you. Watch our Automate Your Budget Masterclass at budgetbesties.com forward slash automate. We'll show you step by step how to finally organize your money, how to set up your accounts and put your budget on autopilot. So your bills, saving and spending run like clockwork. Imagine less stress, more savings and the freedom to spend money without having to track every dollar or babysit your bank account. Go to budgetbesties.com forward slash automate to start today.