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.