A common debate among financial planners when discussing life insurance is whether one should buy term insurance or insurance that provides a cash value. Among the points of discussion on the term side is that one should “buy term and invest the difference,” the difference being the lower term premium in the earlier years. One counter-argument on the cash value side is that people don’t– or won’t– invest the difference.
As one who was a “termite” and a financial planner, I’ve given a lot of thought to the “invest the difference” part.
Admittedly, I did not take the difference in premium between the term and cash value products and put it in the bank or buy securities. But to my way of thinking, I did “invest the difference.”
You see, financial planning is not only about economics. It’s also about life balance. It’s about balancing the present with the future. And just as one should not be spending every last penny– or worse, running up tons of debt– one should also not be depriving themselves of current pleasures as they save every last penny for the future. I’ve seen far too many people depriving themselves of basic needs, only to pass on and leave large inheritances to heirs who are more than happy to spend the decedent’s money.
Getting back to my situation and how I invested the difference. It was invested in family. It was invested in memories. The dividends are the ability to sit with my wife and now adult children and reminisce about family trips, broken fan belt and 3 AM hotel fire alarms notwithstanding.
So it’s perfectly acceptable for your financial plan to allow family trips, and other memory producing events. They also pay valuable dividends.
