Page 47 - Book3E

CHAPTER 7
Living Successfully on a Single Income
If you’re already a single-income family, you’re probably well acquaint- ed with what it takes to live on less income than what you take home each month. That’s really the secret—whether you’re a two-income family or a single-income family—living on less and saving the remain- der for emergencies and unexpected expenses that are sure to come.
As financial expert, author, and consultant Suze Orman writing for Yahoo Finance advises, when your family’s financial well-being depends solely on one paycheck, it’s important to do everything possible to protect that paycheck. She cautions single-income families to avoid specific financial mistakes, including not having life insurance nor disability insurance, saving for college before saving for retirement, and leveraging your home as a credit card.
No Life Insurance
Without question, life insurance for the only breadwinner of the family is an all-important safety net. It essentially ensures that the paycheck continues should the breadwinner die. Orman recommends buying a “term” insurance policy that is equal to 20 times what your family’s annual living costs are. Typically term insurance is not very expensive if you are in relatively good health. And buying 20 times your family’s annual needs means they can live off of the interest of the death benefit instead of having to draw down the principal. Orman emphasizes that it’s important to only purchase term insurance. Other
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