In July 2008, State Farm Life Insurance Company announced the results of its first ever Fiscally Fit Cities Report, whose findings indicated that less than 50% of American households are making provisions to secure their financial future. The report measured citizens in 50 metropolitan areas in terms of investments, quality of life and Life insurance coverage. Twenty-seven criteria were analyzed that demonstrate what Americans are doing to maintain their finances.
The researchers discovered that citizens in the cities deemed most financially fit were creating strategies to protect their assets with short-and long-term investments. However, what was missing was a holistic approach to personal financial planning, including owning enough Life insurance coverage to keep their families afloat after the sudden death of a wage earner.
Surprisingly, researchers found that citizens in areas with high household incomes were not saving enough nor protecting assets adequately, as you would expect. In fact, people in wealthier areas spend more on real estate and are less disciplined in saving money and purchasing Life insurance to protect their family.
Ultimately, the data revealed two concerns: Americans aren’t looking at their finances as a complete package, and they don’t understand the importance of Life insurance.
As a rule of thumb, most people require seven to 10 times their annual income in Life insurance benefits if their family is to maintain a comparable standard of living at their death. The other issue is not insuring all of the family members who need coverage. Many families believe the primary wage earner should be the insured; however, they fail to realize that a stay-at-home spouse or a second wage earner also needs Life insurance.
In addition to examining your Life insurance needs, consider these simple steps to plan for tomorrow:
- Take care of yourself – Good health leads to a longer, fuller life and more options for generating income later in life. Good health can also help control costs, particularly for insurance policies.
- Stay balanced – Although it’s tempting to spend when you are doing well, without proper planning you might need to lower your standard of living later in life. It’s smarter — and less disappointing — to live conservatively and prepare for the unexpected.
- Start early – You’re never too young to reduce debt and live within your means, invest wisely, protect your assets through Life insurance, and enjoy a healthy lifestyle.