Money Management - Head Matters

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 8. Step 3: Insurance


Create an insurance plan

Since Henry’s employer doesn’t provide any health insurance, Henry finds a catastrophe policy for $30 a month that will cover his expenses above $1,000 per year. He increases his car liability insurance to the recommended $300,000 for an additional $10 per month, and he finds a term life insurance policy that will pay $250,000 to his future dependents (called beneficiaries) for only $20 a month (the cost is low since he is so young).

We will add these to Henry’s expense sheet:
 

 Expense Source  Per Month
 Mortgage/rent  $600
 Heat, water, electricity (average per month)  $80
 Cellphone  $90
 Groceries  $250
 Transportation (gas, oil, car payment)  $250
 Insurance:  
Car
$80
Health
$30
Life
$20
Cable TV, Internet $90
Snacks, meals eaten out (from notebook records) $200
Child care $0
Pet care $50
Loan payments (car, etc) $120
Credit card payments $150
Clothes $50
Entertainment (movies, dates, concerts) $125
Savings $0
Other $50
Total Expenses $2,235
   
Compare Income and Expenses  
Henry's total monthly income (from Step 1) $2,165
Henry's total monthly expenses (from Step 2) $2,235
Balance (subtract expenses from income): $(70)


These additions add to the negative balance. He’s now $70 in the hole.

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That's not so bad.
I thought you told me you had plans for school, a car, a sound system. Where’s that money? Are you saving for those?

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