Monthly Bill Reduction – How We Did It

In my last post I talked about how I was able to not only restore our Disney fund but send in a huge tithe AND pay off almost 20% of my credit card debt. You may wonder HOW I managed to do that, given the fact that I talk all the time about attempting to reduce our monthly bills.

The answer is easy: life insurance.




Denis and I both have life insurance that we got in 2000. We got two policies – one whole, one term. We’ve been paying diligently on both policies since they were created. Combining the whole/term the deceased spouse would have enough insurance to pay off the mortgage, pay off all debts, pay for the funeral expenses AND have enough left over to enable the other spouse to raise the kids on a single income for quite a while. College wouldn’t be paid for, but at least they’d have a roof over their heads, clothes on their backs and food in their bellies.

And I was perfectly content to pay for those policies, until I read a very interesting article series on a blog I read about personal finance. The author talks about investing the premium differences and getting a much larger return on his money for the same number of years invested in a whole life policy. From MY perspective, given the fact I’m looking at ways to clear out my consumer debt IN ORDER to be able to invest in our future, the thought of trading our whole policies for term sounded intriguing.

By trading in the whole life policies, we were guaranteed an influx of cash because of the refunded premium payouts we would both receive. But our insurance coverage would remain the same. AND we’d have the added bonus of reducing our total life insurance premiums by about $50 EACH per month. Again, for the SAME dollar amount of coverage.

So we did it. I called our life insurance company and asked to trade our policy from whole to term. By keeping the dollar amount the same we were not required to re-take the medical exams we took in 2000 (which I’m VERY grateful for since I weigh more now than I did in 2000). Effective April 16 our premiums will save us an additional $100 per month in expenses. Effective TODAY I received my whole life policy premium refund and when combined with my job’s flexible spending account deposit made this week, I was able to send an entire 3-months’ worth of tithing, pay almost 20% of my consumer debt AND restore our Disney fund.

With Denis’ premium refund, we will be able to replace our water heater, pay off ALL of his consumer debt, put a significant portion into a 12-month CD for guaranteed savings, AND put some into the kids’ savings accounts (we’d put it in their 529 plans but they both took a MAJOR hit in the last quarter and I’m loathe to throw away any money due to the economy – so we’ll just put it into their savings accounts until the 529s are back on an UPWARD direction).

And, once all this is done, we’ll finally be in a position where we are not living paycheck to paycheck AND can actually afford to pay off the rest of my consumer debt a little bit faster AND put a little bit of money into savings each month. And Disney? Will still be a LOT of fun and CASH-ONLY.

My Signature

11 comments

  1. Thanks, Pinyo! I devoured your life insurance series and it really got the debate going in my head. It pretty much seemed like a no-brainer. So THANK YOU for writing that series! We won’t be able to invest a lot towards our retirement now, but we WILL be able to continue paying off my debt at a faster rate, thus allowing us to begin aggressively saving for our retirement in a couple years.

  2. “…we’d put it in their 529 plans but they both took a MAJOR hit in the last quarter and I’m loathe to throw away any money…”.

    You’re trying to time the market. That is a mistake. The best way to succeed is to learn about investing, and then make a plan and stick to it.

    ———–

    “I was able to send an entire 3-months’ worth of tithing, pay almost 20% of my consumer debt…”.

    Anyone who is carrying credit card debt shouldn’t be tithing (I’m assuming you’re tithing to a church). You are essentially giving away money you don’t have – and worse – you’re putting it on a credit card. Churches are huge businesses; don’t be conned by them. God doesn’t need your money, despite what your pastor says. Don’t borrow money to give to your church – put your family first.

    Best wishes to you.

  3. Bob, I must ardently but respectfully disagree with you on most (if not all) of your points.

    1) We’re not trying to time the market AT ALL. What we’re trying to avoid is putting in money to the 529s when they are really suffering. I’m serious that BOTH of the funds lost 25% of their worth in ONE QUARTER. That’s disheartening. We feel we are being BETTER stewarts of our money by holding the money until the economy is stablized and then put what we continue to save in the next few months into the 529 plans when they aren’t suffering as much.

    2) I haven’t used my credit cards in three months and have said that many times on this blog. In December 2007 I become convicted about my debt, and made the decision to become tax-free. It started with Christmas – all but one present I bought were paid for in cash. I’ve been pretty diligent about not using them.

    3) Did I say I charged the tithe to my credit cards? No, I didn’t. I gave 10% of my SALARY as well as 10% of the money I got from trading in my whole life insurance for term life insurance. I didn’t use my credit card to tithe – and never would. That’s not tithing. In December, along with deciding to become debt-free, I also made the commitment to honor God by giving a 10% tithe in 2008 as opposed to the 2% I usually gave each year. I’m not “conned” by any church – I’m a born-again Christian who feels it’s important to do what I’m asked as opposed to coasting. For years I have NOT honored God’s commandment to tithe, and have been broker than broke. In 2008 I’m committed to tithing and look what has happened – God has blessed our family and we’ve been able to raise money for a cash-only vacation in May, we’ve paid off 20% of our debt, and we haven’t incurred any ADDITIONAL debt in those months.

    God doesn’t want our money – He wants our trust that He’ll provide. I’ve put my trust in that, and he has ABSOLUTELY provided. LaStly, churches aren’t businesses – they are ministries. And I’m fulling willing to support that.

    But again, let me stress – I’m not borrowing money to give to the church. And I AM putting my family first. It’s why I’m tithing, and why I’m trying to get rid of debt. And so far? I’m doing great.

    Thanks for posting.

  4. You are trying to time the market with respect to the 529 plans. The best time to buy is when the market is down depending on the age of your children. In a nutshell you are accumulating units. If a unit is at 5 currently when the market is down you’re better off buying rather than waiting till the unit “stabilizes” back at 8 or even 10. You get more units for your money.

    If your kids are close to college it would be a different story.

  5. Wow Jaynee, neat story!

    Note: Don’t listen to those who think you should invest regardless of whether the market is tanking. Let them waste their own money. Me? I’ve moved into money markets and have managed to prevent a significant loss. Once I see stability again, as easily defined by about 5 technical indicators, I’ll make the move back into equities.

    Try reading Phil Town’s book Rule #1 and this post at Early Retirement Extreme:
    http://earlyretirementextreme.com/2008/04/the-major-risks-of-buy-and-hold-index-investing.html

  6. Thanks for the backup, Ron! 🙂 I have mentioned money market funds to my husband as a possible alternative to putting the kids’ savings into a regular svgs account.

  7. Hey Jaynee – I think it’s awesome that you’re getting back on your feet. It’s a bitter pill to swallow, I know, but so worth it!

    I don’t know if Clark Howard’s radio show is broadcast in your area, but he always tells people to pay off their own consumer debt & save for retirement BEFORE saving for college. 1) The child may not be interested in college, and 2) he or she may get a scholarship, and 2) he or she has many more years ahead of them then you do…presumably. He has a really great website, too.

    cristan’s last blog post..On vacation, in the library

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