If you are shopping for life insurance for your significant other or family, here is a quick rule of thumb: buy at least ten times what both of you together make. So if both of your earnings are $50,000, consider getting life insurance in the amount of $500,000. The ten times earnings metric is a good rule of thumb as it ensures enough time for your dependents to get on their feet while accounting for taxation and the fact that the grieving processes can take a long time. For a stay at home spouse, you might consider getting something in the range of $400,000 to $500,000. Don’t bother with getting life insurance for your minor children. If, heaven forbid, your kids do pass away, you might consider getting a rider to your policy that allows for some funding for burial expenses.

Keep in mind that the main purpose of life insurance is to enable your family or partner to maintain a similar level of lifestyle as they are accustomed to. For instance, in our case, I would want James to be able to stay in our current place and also to be able to finish his doctorate without having full employment. On the flip side, while I could manage our mortgage and finances on my income, I couldn’t do so while still fully funding my retirement and being able to save for additional goals. It’s important that building wealth isn’t a major concern for your loved one if you were to pass away.

Everyone’s situation is different, so think about what works from you and what is important to leave to care for your family.

Best,

Miel

MANAGE YOUR MONEY TOGETHER

Here are some simple guidelines for DINKS to build wealth:

1) Collaborate: Meet regularly to talk about money, set goals together, track and monitor them.

2) Understand and respect your partner. Take time to understand your partners values about money.

3) Watch the numbers. Get a budget, monitor your spending and track your net worth.

4) Max your retirement. Maximize contributions to your tax deferred retirement accounts.

5) Invest in stock. Stocks perform better than bonds or cash.

6) Avoid high interest debt. Credit cards and title loans are financial cancer.

7) Diversify. Don't put all your eggs in one basket.

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