We occasionally hear people say “THIS is why you don’t need mortgage protection” and then offer their uninformed advice. We disagree (in most cases), but for this article, we will play devils advocate and agree with them. We will also play around with some numbers to see if this is an accurate statement.
AVERAGE ANNUAL US INCOME
The average US household median income is now right around $60,000 a year. Some people make more, and some people make less.
Assuming an average income of $60,000, a person will bring home an average of $49,000 (not including local and state income taxes). This also does not include state sales taxes or other fees or property taxes).
Let’s assume all the other state, local, and property taxes add up to another $9,000 a year. Our $49,000 has now turned into $40,000 in take-home income. This means you will have about $3,333 a month left to spend.
AVERAGE MORTGAGE PAYMENT
The average mortgage payment in the United States is just over $1,000 a month (NOT including utilities, maintenance, homeowner’s insurance, and repairs).
Let’s assume you pay $500 a month for utilities, maintenance, homeowner’s insurance, and repairs. With your mortgage expenses subtracted, your remaining monthly income is now at $2,833.
AVERAGE AUTO PAYMENT
The average auto payment has hit a record high of $515 a month (and that’s if you have only one car). With one car, you are now left with $2,318 in monthly income. https://www.usatoday.com/story/money/personalfinance/budget-and-spending/2018/03/02/americans-borrowing-record-amounts-auto-loans-even-interest-rates-rise/388517002/
The average cost of feeding a family of four can run from $146-$289 a week in the United States. Let’s assume $250 a week for groceries that leaves you with $1,318 left to spend for the month.
At $1,318 a month (roughly $43 a day to spend or save), we still left out expenses such as hobbies, entertainment, eating dinner, investing for retirement, children’s education, credit card bills, medical bills, and many other expenses that happen daily.
WHAT ABOUT RETIREMENT?
Let’s assume you’re left with $1,318 a month to spend, and you are putting $318 a month of that into retirement. You now have $1,000 a month to spend (roughly $33 a day to spend on other expenses).
$318 a month invested for 20 years with an 8% return would leave you with $187,308 in investment income. Many experts say you should not withdraw over 4% a year or you risk depleting your retirement income before you die.
If you withdrew 4% of $187,308 every month it would leave you with it would leave you $7,492 a year in retirement income ($624 a month a month, not including taxes).
Let’s say you invested that $318 for 30 years at 8%. The return this would leave you with is $473,934. That would leave you with $18,957 each year in retirement income.
WHAT ABOUT INFLATION?
30 years from now with an average inflation rate of 2.5%, your $18,967 will be worth $8,869 in today’s dollars ($739 a month in today’s dollars). Can you imagine right now living on $739 a month (and this doesn’t include higher income tax rates 30 years from now)?
It’s hard to say in 30 years if Social Security will even be around. We imagine it will pay out less than it is paying now.
So when we hear people say they don’t need mortgage protection, we’re very curious about their thought process.
WHAT ABOUT CREDIT CARDS?
Most people don’t just spend their current income. They also spend money they don’t have and put it on credit cards. The average credit card debt in 2017 was $6,354.
Most people and families don’t have enough money on a monthly basis to pay their bills, save for retirement, and live the life they want to live.
So if most people are struggling now with money, what happens when a spouse or partner dies? Most people’s finances get worse when a loved one dies…not better…and they lose their home within 1-2 years without mortgage protection or sufficient life insurance (and you shouldn’t rely on employer life insurance).
HOW DO YOU SPEND YOUR MONEY?
So, when we hear people say they don’t need mortgage protection, it generally means they would rather spend their money elsewhere, not that they don’t need mortgage protection.
Spending money on toys, hobbies, activities, and going out to dinner is fun….lots of fun in most cases!
However, is it worth losing your home over when a loved one dies?
Is protecting your home something you even need to think about?
IS MORTGAGE PROTECTION AFFORDABLE?
Mortgage protection is affordable and can make sure your home is entirely paid off for those you leave behind (who won’t have the money you have at your job).
We hear about families losing their home every day when they lose a loved one. What kind of legacy do you want to leave behind for your loved ones? Do you want to leave a legacy of your family losing your home, or keeping your home?
YOU DON’T NEED MORTGAGE PROTECTION IF…
So when we hear from some people say you don’t need mortgage protection, we are confused.
We agree that you don’t need mortgage protection if:
- Everything goes right financially.
- You can guarantee you’ll never die before your home is paid off.
- You can guarantee you will always be healthy.
- You can guarantee you will never become disabled.
- You can guarantee your spouse or partner whenever die or become injured.
- You can guarantee you’ll never get fired, downsized out of a job, or outsourced from your job.
- You can guarantee the stock market will never lose money.
- You can afford to invest thousands of dollars a month for retirement.
For most people, mortgage protection is a necessity, not a luxury.
So when people tell you why you don’t need mortgage protection, you should see if this applies to you. Most people do not have enough insurance to protect their home and provide additional money for other life expenses.
There is no greater feeling than owning your own home. And yet, most people never achieve this goal. Wouldn’t it be nice for your loved ones to keep your home after you die?
Wouldn’t it be nice to give your loved ones the gift of a paid for a home for the rest of their lives should you die unexpectedly?
Call us today at (888) 460-0903 or fill out our free quote form to get your home protected today!