Expenses During Buffalo's Snowageddon and Why They Pale Against the Real Fiscal Armageddon

People talk about the cost of working, and how you only need to save 70-80% of your income because your costs will go down when you retire.  This might be true for some people, but I don't think it is true for us.  We had a perfect example this week when we were stuck at home during a set of storms that hit the buffalo area.

Since we are home the food we are making is a little higher end (the meat store was open one of those days), the stove is on for longer, the electricity is on more and the heat sure is a lot higher.  Granted I am trying to do work while at home (and I do have a kid that makes that difficult) but I think most of the costs would be about the same.

However, I do have to admit I am not spending gas to get to work, which does save some money.  In this case both my husband and I will be working during the weekend to make the lost days up but if we were retired, we obviously would not.  That is about a $26 saving.  Granted my husband drives an hour each way for post-doc, five months ago that cost would have just be $6.  But let's go with $26.   Are the increase costs of staying home add up to $26?

The meat store was an increase of $5, plus some meals we normal eat on the weekends will have to be replaced for probably another $3.  But that is just $8, surely we did not spend another $18 just on utilities?  And honestly I am not sure.  I have not found an easy was of comparing utilities except for assume a 3% decrease of your costs by for every degree you lower the thermostat.   But that is monthly, plus we are not increase it for the entire 24 hour period, just while we are up. And that does not include water or electricity increases which I admit are very much increases while we are home.  Nor does it include the wear and tear of items at home.  Using my computer at home is likely to decrease years the computer useful for.  Same goes for the oven or microwave.  When I think about it, I don't think all of these expenses add up to $18, but there is a big expense I did not cover.

Health insurance
I spend a little over $140 a month for my share of health insurance, pre-tax.  My employer, well now, they send over $550 a month.  So really, I need an additional $550 plus the cost of taxes to cover my health insurance.  I know some people say, well what the ACA?  I am not holding my breath.  We might get something close but GOP won this last election and they want to get rid of it.  If the democrats don't come out in two years, we will have a republican president and congress and then ACA will be gone.  I can't trust democrats to get out and vote, because they don't.  So, I go with COBRA when I looking at expenses.

So, if compare your "working costs" against COBRA, I'm pretty sure you are going to come out ahead by working.  So please let my Smowmadegon encourage you to save and expect to spend more than what you live on now, because health insurance is not getting cheaper and we are just getting older. 

Term Life Insurance

There are two types of life insurance, term or whole. For most people term insurance is the way to go. The only exceptions come about when you are bringing in a lot of income and have maxed out your 401k and IRAs. But for young people, I do not think any of us are in that boat so I am going to focus on term life insurance. Term life insurance is misnamed, it should be named income replacement insurance.

Term life insurance comes in different amounts of money ($100,000 to $1,000,000) and for different terms (10-30 years). The cost starts lowest for the lowest term and amount of money and increases as you increase either variable. The benefit for getting the longest term is the rate won't increase for that term.

Often people can get a small amount of life insurance through their employer for free and larger amounts for pennies on the dollar. My employer gave $20,000 for free and an extra $1000 for every .10/week. This means $5.20 for every $1000 extra you would want per year. However, I did not take advantage of any extra life insurance through my job. You may be asking, why? My fiance and I both work, we live on my fiance's income (the higher salary) and bank both mine and the rental income. Given that term life insurance is suppose to replace the income of the provider I do not need any. We could hypothetically self-insure for my burial if my work did not provide the $20,000 free life insurance.

Now in my fiance's case, I am dependent on his income so he should have life insurance. On the other hand, I do have both my job and the rental, so I could survive without his income, though it would be tight. This would change if I got pregnant or started graduate school. We also determined that after graduate school my fiance likely would have life insurance through his job and therefore we would not need a long term. Considering all of this,if we chose to get life insurance, we would choose the ten year term and probably the lowest amount that we could get ($100,000).

While we were checking out disability insurance we checked out term life insurance for both my fiance and me. The cost would be between $100-$150 per year for either of us. We could get life insurance for both of us, and disability for just $50 more than I expected to pay just for disability. Though that is amazing I do think we will wait until we need the insurance and for now just add more money to our Roth IRAs.

Disability Insurance

Everyone who has a job and needs the income should have disability insurance, but it can be very expensive. Disability insurance pays about 60% of your wage if you are injured and cannot work. Some pay only if you are unable to work any job, other will pay if you cannot work in your current position. The real kicker is that if you buy disability insurance not through your employer it costs about two to three percent of your salary. Now if you are like me, you are sitting there going "ouch". I'm suppose to save 10-20% of my salary, now you saw I have to give up another 2-3% for disability insurance? And we are not even counting in taxes here.

But disability insurance is important and worth the cost. What are you going to do if you can't work? What can you do if your job requires you to talk and you have lost your voice? Or what about loosing a hand? Do you think you could do your current job if you lost a body part or were in a wheelchair? The only benefit on buying disability insurance not through your employer is it is not taxable earnings but if your buy disability insurance pretax, through your employer, it will be taxable earnings.

My fiance and I have been looking for disability insurance for him for a few months but again, it is very expensive. We could only find disability insurance costing 3% of his salary. We had decided to wait to the wedding and then just bite the bullet and get it. A month ago we were at a home show and MetLife had a booth there. Since I am an eternal optimist, I thought lets see if they have a lower price. We just finished the paperwork and MetLife gave a quote that is under 2% of his salary. What seemed to make a difference with them is that my fiance is a researcher and paid by the government and that is something MetLife considers. Also, his lifestyle and job are not risky and I believe someone with a risky lifestyle would pay more. With that combination MetLife made us an amazing offer. I honestly was shocked on how low the price was. We went home and I read over every little bit of the paperwork and it seems legitimate.

Side note, I make no money off this post.

Because of the savings, my fiance and I are now able to afford life insurance as well and may also be able to put more into our retirement accounts.