December 14, 2023

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Life insurance is something easily overlooked when we're thinking of our finances, largely due to being "young", but also due to misconceptions about the cost.

Have you ever wondered, what portion of Americans overestimate the cost of life insurance? Is it A. 45% of us, B. 63%, or C. 82%?

Here are the topics for today:

Financial Habits to Change in 2024
Don't Buy The Wrong Life Insurance
How Gen Z Is Changing Communication at Work

FINANCIAL PLANNING

Financial Habits to Change in 2024

Habits are one of the most powerful drivers of our actions and outcomes in life, especially when they're deeply ingrained on a subconscious level. Forming habits is not easy, and removing bad ones is equally as daunting.

Regardless though, identifying bad habits and supplanting them with good ones is quite possibly the single most rewarding challenge you can take on in your financial walk. What may seem like a minor difference at the moment can quickly become a stark contrast down the road as the snowball of progress grows.

The beginning of a new year is a great time to start that change, even if it's a bit cliche.

So, what are the top financial habits to change in 2024?

Not budgeting regularly: Your budget can (and should) also change over the course of a year. Maybe you've paid off your debt and it's no longer a part of your monthly spending, maybe you've added some, maybe your income changed, car insurance cost increased, or rent decreased. The end result is that the proportions of your budget categories have inevitably shifted, and they require review sometimes.
Putting debt on the back-burner: As America's pile of credit card debt continues to mount, it seems that carrying a balance has become the new normal. Tough as it may be out there at times, allowing ourselves to accept this can be detrimental over time, and is an extremely harmful habit that must be broken.
A lack of action: Analysis paralysis is often the curse of the gifted — you're smart, but that means you often ponder more than you practice, you want to know everything before doing anything. But the most valuable lessons in life often come from action, and so does progress. If you want to achieve a financial goal bad enough, eventually you have to stop thinking about it and start throwing darts at the board.
Settling for what you have: This is a prime example of confirmation bias at work. We may want something better, but to avoid the work needed to get there, we console ourselves into believing that where we are now is actually good enough. We do this to avoid the dissonance that arises when we see the gap between where we are now, and where we want to be. It's this limiting habit that keeps most people from their goals.
Not adjusting your expectations: It's easy to become okay with mediocrity if you get comfortable with it. If you've grown accustomed to having a $10,000 credit card balance that you just manage, you might convince yourself that it's fine, you don't need to get it down as long as you can afford it. This is a huge bad habit, and it's the equivalent of putting yourself on a financial treadmill.

FINANCIAL PLANNING

Don't Buy The Wrong Life Insurance

The philosophical question of "What is life worth?" has been explored by nihilists and fundamentalist religions alike for thousands of years, and believe it or not, they still haven't figured it out. But someone else did though, and it wasn't Nietzsche, Camus, or even Jesus himself, it was actually...insurance companies.

And thus, enter the game of life insurance. It's a tricky game if you don't know your stuff, and there's a lot of "stuff" to know when it comes to these policies, which is why so many end up choosing the wrong kind.

Know these basics first

Kinds of life insurance: Generally, life insurance comes in two main forms — term and whole. Term LI is simple, it covers you for a set period of time for a set monthly premium based on your benefit. With whole life insurance, you're covered for your entire life, and these policies often come with a built-in "cash value" component where the insurer allocates some of your premium payments to "cash" where it's either invested or earns interest. Policyholders can receive this cash if they cancel the policy or make a withdrawal.
How common is it? Life insurance is most often utilized by folks with dependents, and the data bears that out. While about 50% of those in the U.S. have life insurance, only 34% of those ages 18-24 do, whereas 57% of those 65 and older have coverage.

How to pick the right life insurance

The most recent data from 2021 shows that roughly 60% of policies sold were whole, or permanent, life insurance. Although there are exceptions, this trend doesn't exactly mesh well with what most financial planners would advise.
For most people, term life insurance is the most effective way to take care of your loved ones and dependents in the event of an untimely death. A healthy, non-smoking, 30-year-old male would pay about $341 more dollars per month for a whole-life policy compared to a 20-year term policy, making term life extremely cost-effective.
Are there exceptions? Yes. For example, people with dependents who have disabilities or may require long-term financial support, those with health complications that may worsen at an unknown time in the future which would make them uninsurable, or even those that want to leave a large cash legacy to their family and/or charity of choice.

Deciding what you need

Firstly, you may not need any... yet. If no one depends on your income, i.e., no children, relatives, or significant other, then there's not much reason for you to be spending monthly on a policy. Life insurance isn't for you, it's for others.
Some advisors will recommend a policy that accounts for 10-15x your average annual income. For example, if you make $50,000 per year, you should probably be aiming for a policy with a death benefit ranging from $500,000 to $750,000. The higher the number, the higher the premium.
Cost of insurance increases as you age. The older you are, the more at risk you are of dying. Shocking, right? 40% of US policyholders wish they had purchased their policies at a younger age, not before it was needed, but at a younger age nevertheless.
And how much you actually need depends on your unique situation. If your only dependent is your spouse and you're both in your 60s, you may not need the full 10-15x benefit. If you're a 29-year-old with 3 children and a spouse, you might qualify as needing more than the 15x range.

CAREER

How Gen Z Is Changing Communication at Work

Each generation comes with its own unique set of quirks, qualities, and conundrums, and Gen Z is no exception. This might be a bit of a rub for certain age groups, but we know that evolution is necessary at the end of the day.

Gen Z has brought much of this change to the workplace — namely, in the form of workplace communication.

What's changed?

Communicating openly: Older workplace colleagues seem to have taken note mostly of Gen Z's tendency towards openness, and avoidance of traditional communication boundaries. Gen Z coworkers seem to have no qualms about speaking their minds and ignoring the platitudes.
Expecting more: What else sets Gen Z apart at work? Higher expectations. Amongst those surveyed, 80% of Gen Z respondents said that mental health support and policies were important to them when scouting employers.
Anything else? Yes, younger employees expect equality too — largely in the form of salary audits and data regarding gender, race, and location pay gaps.
What's the takeaway here? Although the rise of social media and remote work may have its downsides, it seems to have also given rise to some productive advancements in the area of casual, open communication — something that's a bit uncomfortable at first, but productive in the long run, and a change we can all learn from.

Want to learn more? View our live upcoming webinar!

Protecting Your Assets & Loved Ones with Insurance | Dec 19 at 10am PST | 1pm EST

How much insurance coverage do you really need? This is a key question to ask when you have dependents who rely on you for their daily living expenses. You should insure your property against natural or unexpected disasters, but you need to insure your income as well.

In this session, we'll review disability insurance, including how much and how to source coverage. We'll also show you how to calculate your life insurance needs and review types of policies and their correct applications.

You won't want to miss this event! Register here

Please note: Origin does not sell insurance products. This session will include information and resources specific to the United States. This session is intended specifically for Origin's members residing in the United States.

Origin is the leading financial wellness benefit that empowers you to take control of your finances. Sign in or create your account at useorigin.com to start your journey today.

🌊 BY THE WAY

👪 Answer: It's 82%. The vast majority of people overshot the estimated monthly cost of life insurance by a mile. (Forbes)
🏠 Renting is officially cheaper than buying in most cities (Fortune)
👀 ICYMI. The drawbacks of autopay (Finny)
👩🏻‍🦱 For younger buyers, house hacking is the new form of homeownership (CNBC)

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