Today's question is-- What does $100,000 buy?
Yes, I bet you can list a lot of desirable items from cars to trips to home improvements. But if I ask you in terms of the goal of financial security for your family what does $100,000 buy, maybe the question is not so easy to answer.
$100,000 may seem like a good sum of money when you are paying your monthly bills. And the bills are each for under $2,000. But how many months of bills would that hundred thousand cover for your family if you had died last week? Have you recently added up all of what you spend to maintain your life style? What is the absolute minimum the family needs? What is the amount you are currently living on? What would be the right target?
Suppose you had $100,000 of life insurance or of assets in the stock or bond market how long would that money keep your family's bills paid?
Here is one way to answer that with a hypothecial example which is not representative of any specific situation. Your results would vary.
If you could find an investment that earned 5%* on average every year and you invested $100,000 in that hypothetical investment, that might provide your dependents with about $790 dollars a month for 15 years. Then the money would run out.
Will $790 pay all the bills each month? How many times $790 would the family need to be able to pay all the bills?
If you owned $500,000 of life insurance on your life, then that death benefit might provide your family with about $3,953--under $4,000. Is that about right? Do you need more insurance, more assets?
Whether the money comes from life insurance or from other assets, figure that each $100,000 might provide about $790 a month. Hold that thought $100,000 for each $790.
That will help you gauge your goal of providing financial security for the family's bill paying. Yes, there are other aspects of financial security but we will take them up another time.
If you would like a simple cash flow sheet to figure out what your monthly expenses are just download one from www.wealthychoices.com/cashflow.
Once you complete filling in your expenses you can ask--"Is my money being spent on what I really care about?" If you want to discuss it with me, just email me at Penelope@wealthychoices.com or call me at 1800 631 1970.
* The hypothetical rate of return does not reflect the inherent cost of investing.
Until next time, consider the idea that your daily choices with money lead you to or away from wealth. Wealthy Choices(R) where money, values and goals make plans.
I'm financial planner, Penelope S. Tzougros, PhD, ChFC, CLU with offices at 95 Sawyer Road, Suite 500, Waltham, MA 02453.
Securities offered through Linsco/Private Ledger. Member NASD/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you consult me prior to investing.