Lifestyle Insurance – Episode 341

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[00:01] Welcome to the Prosperity Podcast. On this episode of the Prosperity Podcast, we’re going to be talking about lifestyle insurance and how to avoid lifestyle creep, problems that happen as your salaries increase as you move and as you grow, and how you can, we’re going to use not the word plan, but create a strategy for it. How about that, Kim? I love it. Thank you, Spencer. It sounds awesome. I’m so glad that we’re having this discussion when we are because I had a reasonably thorough chat with my oldest son, Robbie, who is a great thinker and owns a couple policies. He really questioned this word, lifestyle insurance. I’m coming at it with more wisdom, I think, than I would have even a couple of weeks ago.

[00:52] It’s interesting. This term was suggested to me by some people that are helping us with webinars and had done a lot of research on millennial and Generation Z. They felt like the term lifestyle insurance would be something that this group of people could grasp. I immediately loved it. I was like, yeah, you’re right. That’s exactly what it is. Right? It’s money for emergencies. It’s money for opportunities. It’s supporting your lifestyle. It contributes to your lifestyle and it enables you to sustain, and I am saying this carefully, and maintain appropriateness in your lifestyle. What does that mean and what doesn’t it mean? Are we good so far? We are good so far. What it does mean is that when you have,

[01:42] for example, bought a home and it’s an appropriate home for your level of income and maybe you’re going through a job transition or maybe you want to take a little time off because a baby has been born or maybe you are in a position to take advantage of an opportunity that would mean some business. You’ve got a commission job or a sales-related results-paid job, but it’s going to be a while before some of that income is there. The life insurance can create a support system for your lifestyle by giving you the extra cash and cash flow to maintain your appropriate lifestyle at that time, during that time. I’ve used the life insurance on that for years and years and years and years and years. I’ve always been in a relationship, both my first and second husband are paid on results.

[02:33] They own businesses. Of course, I own a business. I’ve always been in a situation where our entire family had what we’ve come to call lean years and green years. Our podcast listeners have heard me use that term before and it’s quite self-explanatory. During lean years, we have used the life insurance to support our lifestyle, hence the term, and that’s been very, very helpful. What it shouldn’t mean or what it doesn’t mean and what we want to be super careful about is that it doesn’t cause a lifestyle to be supported that is inappropriate. In other words, you’re not out there buying cars that are beyond your means. You’re not out there going on vacations that are costing a ton of money and never saving. You’re not out there sticking your head on the line and over

[03:24] the line in terms of the costs that you incur to live on a monthly basis. You certainly don’t want to be barring against cash value of life insurance to put food on the table and or make car payments or put gas in the car, et cetera. Not that I haven’t done that. Sometimes when lean years are lean, they’re really lean and literally the only thing that kept us going was cash value of life insurance. Yet at the same time, back to your term lifestyle creep, what is so awesome about life insurance and the required premium that shows up like a bill, we’ve talked about this before, is that it enables you to support your lifestyle while at the same time avoiding lifestyle creep. So just in case you’re not familiar with that term, it means when you

[04:18] enable your lifestyle and your expenses to rise to meet your rising income all the time, you make more money, you spend more money, you make even more money and you spend even more money. When you are making more money in those green years, if you will grab another life insurance policy, add a bill called a premium and a pay to petition, that will help you avoid lifestyle creep because you’re taking the cream off the top of your earned income, forcing it to go into savings, which can then help you maintain your lifestyle if you want to shift gears, try a new business, create a new opportunity, et cetera, et cetera, et cetera. So it’s this huge win-win-win and I know the reason that Robbie struggled with the term

[05:03] was because of lifestyle creep and also not wanting to feel like his precious hard-earned and hard-worked-for life insurance policies were supporting his lifestyle in that negative way, in that way of giving him more money to spend on things that he really shouldn’t be spending money on. Robbie is an incredibly efficient lifestyler. In other words, he lives very simply. He saves a huge amount of his income and that’s a choice that he’s made, which is totally fine for him right now where he is in his life. He’s single, he travels a lot, he has an expensive account because of his travel and so his personal expenses are less, et cetera. So he has a situation that really supports that. At the same time, we do want

[05:49] to have fun. We do want to occasionally go out with our friends or go on a trip or whatever and each person has to make their own decisions about what’s important to them with their money while not succumbing to lifestyle creep. Yes. I think too often that financial experts are talking about forgoing the lattes and over 30 years, how that’s going to make such a big difference in your life. Whereas setting up the habits and having a forced savings account, one that’s going to mobilize your life, is a lot better strategy than forgoing some of the things that you need to enjoy. And so as we know, our recommendation has always been to save first and spend the rest. And what that lets our family do is during the green years,

[06:37] we have nicer vacations and we choose how to spend our money in a way that supports our individual goals. For example, Todd and I are spending money right now redoing the dam for our lake. Well, it’s a ridiculous amount of money in some circumstances, and yet it is nothing in others because it’s necessary and it does what we want it to do and for our property. And so it is something that we are choosing that works for us. Other people would never want to spend that kind of money on dirt that holds up water in a particular location, but they would rather go to Europe or whatever. And no judgment. I mean, that’s totally awesome and available for each person to make their own decision. Not easy when you’re younger. It’s not easy to figure out what your values are and where

[07:34] you should be spending money, but just pay attention to how you feel about things. In fact, I remember one time when I lived in Scottsdale, Arizona, and I don’t think I had kids, I went to the mall one evening. I’d had a big day at work and for whatever reason, I went to the mall and I shopped. I bought some clothes and went home. I don’t remember even exactly what. And I remember just not even feeling good. I had clothes. I should have been excited. These new clothes, whatever. I just got really clear that that is not what I enjoyed doing. I know other people that love to do that. And again, I’m not placing judgment. I would rather spend my money on dirt in our property. And this is me mid-50s. Of course,

[08:17] my opinion at the mall was when I was, I don’t know, probably 25 or 30 or something, but it was a sign for me to stop and pay attention to how I felt when I spent money and time and the way that I spent it and to make adjustments based on what was important to me rather than based on what was normal or considered important by others. I think for a lot of the millennials and the Gen Z and the Gen X, they’re still trying to navigate and figure out those pieces. And so I wanted to tail off for a second. And let’s talk about the sustaining and maintaining of this. And let’s parlay that over to budgeting. When a person is figuring out their budget, oftentimes people don’t factor in that they should be saving in their budget, paying themselves first in investments.

[09:17] When it is the lean years, how are you and how have you seen it best to factor in investing, saving, and all the other pieces like that related? Yeah, great question. So in the lean years, you still want to try to save. Everything’s done on a percentage. And so if you can still save 10 or 20% during the lean years, that’s super important. Sometimes you can’t. And I know we’ve had years like that. So one of the things that’s so valuable about the life insurance is when you have that as your saving strategy, especially if you can get past the first two or three years of the policy and you’ve paid paid additions during those years, which you’re not going to start a policy typically in a lean year. If you do, that’s when that term insurance is right. But if you

[10:04] have whole life insurance and it’s up and running and working for you, then you can use the cash value to help you not only sustain your lifestyle during the lean years, but also pay your premiums during the lean years. And every time a premium gets paid, the cash value rises. So while you might have a rising cash value and a rising loan because you had to borrow against the cash value to pay the premium, you can make that situation work. And I tell a story in the Live Your Life Insurance book of a family that did that during a lean time. It wasn’t even a full year with their car payments. And they use the cash value of life insurance to make their car payments and make their life insurance premiums.

[10:51] And it was, you know, the guy was just out of work for, I don’t know, six months or something, and it totally got them through that space and enabled them to be totally fine and literally unaffected because then when he got his job back, he paid back the life insurance loan as he was able, kept making the premiums going forward from that point. And by the way, the order of that is you pick up premiums first, loan second, and paid additions third, and then you are back literally with no impact at all during that lean time. Well, I think that helps listeners understand the lean and green is really clear and being very principled based in our thinking. Oftentimes you hear financial experts and they

[11:36] dive down these rabbit holes that are only for a few other people. Zoom out, get principled based, and then you’d be able to avoid any problems by having the correct lifestyle insurance in place. How about that? Really well said, Spencer. Thank you. Yes. And listeners, thank you for listener questions. The best thing you can do is send those in to us. There’s a dedicated email account. It’s at hello at partnersforprosperity.com. And with the new year, we would love even more so to be answering those questions so that we can involve you in this podcast and so that we can help answer questions for the community. So thank you for spending time with us on the show today. Thank you for listening to the Prosperity Podcast. To take control of your money and

[12:27] have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.