Having the right insurance is never more important than it is when you have a family. Insurance is sometimes the only thing that stands between your family and financial disaster when a catastrophe strikes. But, more importantly, insurance can also isolate your family from some of the stress about day-to-day life in the face of a tragedy. Although paying insurance premiums may sting a little, when the time comes to call upon your insurance agency for help, you’ll be glad you made room for them in your budget.
There are many different types of insurance available today. Carrying some types of insurance is a no-brainer while other types of insurance may seem a little excessive to you. If you have a family, however, there are certain insurances that you must maintain.
Health Insurance – With the costs of preventative health care skyrocketing higher and higher each year, every family should have health insurance. If you’re among the lucky ones who can count on their employer providing healthcare coverage, you can avoid some of these chunky premiums. However, if your employer doesn’t provide this coverage or pay for it, you must find a way to secure your own coverage. Having regular access to medical care is just too important to be left to chance.
Life Insurance – Ideally, you should have life insurance coverage for both parents in a family. Even if only one parent works outside of the home, the other parent is still performing a very valuable task. If the worst happens and one parent is taken from the family, the remaining parent will want their family’s routine to continue as much as possible. Life insurance benefits could replace the income of the working parent or give the working parent the funds to get help running the household. Getting over the loss of a parent is bad enough without having to ride out a financial crisis, too.
Homeowner’s or Renter’s Insurance – Families who live in a home they own should carry coverage (and are probably required to carry coverage by their mortgage holder) to protect their home and its contents in the event of a catastrophic event. Imagine for a moment the trauma of watching your house go up in flames. Now imagine not being able to replace you and your family’s belongings. Although being able to replace clothing and household items won’t relieve your distress, it will help you get on the road back to normal. Families who rent their homes should purchase renter’s insurance to cover their belongings.
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Many personal finance experts tout the benefits of going to a “cash only” spending system. They say that making this switch will provide all types of benefits to your financial life from helping you budget more accurately to encouraging you to spend less. And, for the most part, they’re right. But can you ever switch to a truly “cash only” spending system?
The answer is that you probably can’t. Mortgage payments aren’t easily made in cash. Many people don’t have a local mortgage holder that they can hand cash each month. Utility companies and car lenders are other vendors that are notoriously hard to pay using cash. You could spend as much as a day driving around town making your monthly payments, if you are even able to get drive to all of your vendors.
Despite the inconvenience, using cash rather than credit cards can work wonders on a family’s budget because of the psychological effect it has on the spender. While signing a credit card receipt after a shopping spree is relatively easy, handing over a wad of cash is much more painful. You see your bank account balance dwindling and the money in your wallet diminish. The perceived difference in the effect of your shopping is the reason why paying with cash is so preferential to using credit cards.
Perhaps, however, the key isn’t to switch to a truly “cash only” system of payment. Maybe a better plan would be to switch to a “no credit” system of payment. You are still avoiding that disconnection from the cost of your purchases that is associated with using a credit card, but you don’t have to chase every one of your vendors around town. It’s the best of both worlds.
Next month, promise yourself that you will pay absolutely nothing with a plastic card. You can begin by using your bank’s online bill payment, or actual checks from your checking account, to pay all of your regular expenses. Your mortgage payment, utility payments, and credit payments will all disappear from your account in a timely manner. Then, you can divvy the remaining money into cash amounts that you plan to spend on food, entertainment, and other variable expenses. Once the cash is gone, you are done spending. You’ve just mastered the “no credit” system of payment.
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