Hey, I'm Austin Williams. I'm a wealth coach here at BetterWealth. And today we're going to dive into a topic, which is how to calculate your human life value. If you never heard those words before, don't worry about it. We're going to get into that in the video, but simply put is that life insurance is a reflection of your human life value. Now, if you're new to the life insurance space, let's talk about like the crux of life insurance. And like, what is like, what is like that like the the pivotal piece or the fulcrum that kind of everything rests on. And ultimately the fulcrum of life insurance is the death benefit. Like no questions about it. I make no apologies whatsoever for that saying that either. I know some people might think a little bit differently, but the foundation of life insurance is the death benefit. The purpose of life insurance is to put the correct value or maybe even the correct financial value on your life. You know, new kinds of savings accounts, they're going to come and go like the Trump MAGA accounts or whatever, but nothing's going to ever, ever help you save. and secure a legacy like life insurance will. Now there's many different kinds of legacies you can leave. So don't hear something I'm not saying, you know, there's relational, emotional, financial legacies, there's spiritual legacies, there's lots of different kinds of legacies you can leave, but life insurance can take care of that financial piece. And that's not to be discounted. That definitely deserves our consideration while we're alive. And I think for this strategy to use life insurance as a tool to both save and, you know, put the correct value on your life is you have to put at least some value on the death benefit in order for this strategy to actually be something that you can stick to long-term. If you don't put at least some value on the death benefit and life insurance, and you only look at life insurance as a savings tool, you know, maybe in a couple of years, you're just kind of like, you'll find yourself like wondering why you're doing this. And it's ultimately because like the death benefit didn't mean anything to you at the beginning. The death benefit needs to mean something to you. And maybe it's not like the full or the main purpose right away. But I think that in time, that death benefit is going to become more and more important to you. And especially later in life, you're going to be glad that you started making steps towards that right now. So life insurance, you know, it can take care of that financial legacy. And the people that it's easier to calculate the human life value of, I found is actually parents, people who they have dependents in the house, they might even have a spouse that's not working that outside the home, they're obviously a a full-time, what I call a full-time household engineer, but they don't get the paycheck in the same way that the spouse does. The people who are the working spouse, they are generally the easiest to calculate the human life value of. Now, it's very obvious that parents represent a long-term financial value to their spouses and kids because if their income disappeared today, then tomorrow their spouses and kids would have to make some pretty difficult choices. Now, let's talk about the choices that are available to spouse and kids if the income earner dies today. what choices are available then tomorrow? Let's talk about first, if they don't have life insurance, well, choice number one, maybe that spouse goes back to work or works more hours to make up for the income shortfall, right? Is that, okay, the income's not coming in. So the spouse has to be the one to do that. Now they're going to have to spend less time with their kids who are also grieving. And you know, there's also going to spend less time processing their own grief. Now the kids might have to go to public school to support the working parent. I don't, you know, depending on whether or not that that's something that lines up with. what your family values are or not. Absolutely zero judgment there, but that probably would have to be an option or there'd have to be something that gets put in place like daycare or something to allow the spouse to go back to work. Choice number two, you could marry out of it, right? And historically spouses of sole income earners, and we're generally talking about historically, this was women who died without leaving a financial cushion for them. They chose a different spouse who was earning better income, usually a man to make up the difference. Now, some people... call this a sugar daddy planning. But ultimately, this is probably not a good position that you'd want to leave a spouse in, whether you're a man or a woman, because you don't want them to have to settle for somebody that wouldn't honestly be the best fit for your kids on a long-term basis moving forward. Or choice number three, you could enact some very painful austerity measures to account for less income. So this means taking your lifestyle and taking your expenses and shrinking it way way way down so Those are the three choices that are available to you. And I had, my heart goes out to the people who've had to make these choices because these are tough choices to make. And I'm not saying that anybody who's made these choices that, that they were, that they're, you know, doing something that's wrong or anything. It's just that you have limited choices when you're in this position. Now let's talk about the choices that your spouse and kids would have if you had life insurance on yourself. Choice number one, your spouse could go back to work or not, you know, up to them. They can choose to go back to work. Or they could use the death benefits to sustain the lifestyle that you, the working spouse, built for them while you're still alive so that, you know, they could continue with those cherished traditions, those making those memories together, having that lifestyle, you know, going on those vacations. even if your income, you're not there to support them with income anymore. Now your kids, they might go to public school or, you know, maybe they can be homeschooled. If your spouse wants to do that, like, you know, totally, totally up to them, but at least that's an option and not a necessity. Choice number two, maybe your spouse remarries or maybe they stay single, but at least it's not a, something that's born out of necessity. So if they do choose to love again, that is not born out of financial necessity, but rather free choice. And some people call this the you've got choices planning. I like that a little bit more than the sugar daddy planning. And choice number three, continue your current lifestyle until the children are grown. You could just use the death benefit to maintain that lifestyle until the youngest kid is self-supporting and then you could choose to go back to work. Now, what is the long-term financial value that you represent to your family? Now, human life value. First, let's figure out your income. Okay, so let's say you make $120,000 a year. So next. let's figure out your cashflow. And that's money left over after expenses that's, you know, being saved in some way, shape or form. And a slush fund does not count here. Just like saving it for a couple of months and then spending it doesn't count. So let's say 20,000 is being saved. You know, your 20,000 to going into a Roth or, you know, some kind of an HSA or crypto or real estate, something. So that means you have a hundred thousand dollar lifestyle in this scenario. 120 minus 20,000 is a hundred thousand. So if you die today, how much of your income Would your spouse like to have tomorrow to cover the costs? And when I was actually starting out with my family's journey to finances, my advisor asked me this and my wife very, very obviously answered the same thing that most spouses answer, which is all of it. She would want all of my income to provide for her, the kids that we were about to bring in the world because, you know, she doesn't want to have to do without things. So like, how can you cover all of your income? for a certain length of time for your spouse? You know, what, what exists there in the world that would allow you to do that? Now, what we're going to need to do is figure out how much of the long-term financial risk that we need to cover here. And so there's some people who kind of say there's like a one size fits all formula out there. There there's really, you know, such as like maybe 10 extra income and that's fine. You know, that's, that's one way to do it. But I think that there's a much more specifically tailored way that I walk through my clients and do this with. So what I do is I take your youngest kid's age. And let's say they're two years old. And now I subtract that age from the age at which I feel like a kid should more or less across the board, be able to support themselves. If something happens to you, like if they need to go wash dishes for a couple of years, they can go do that. But like, what's that minimum age? I take that to be 20, like at a bare minimum, they should be able to support themselves by the time they're 20. So the difference between your youngest child's age and that age of independence, and you can choose any age that you want is the amount of risk that you're going to want to cover. Most people have no idea. where to start or how to really evaluate whole life insurance. That's why we've built the vault. It's all of our best life insurance resources and educational tools all in one place, all for free. We have calculators, handbooks, crash course, deep dive videos on numbers. If you want to learn more, click the link in the description or tag comment below to unlock the vault. All right, back to the video. Now, a dollar today is worth less tomorrow due to the effects of inflation. And, you know, the difference is minimal on a day-to-day basis, but on an annual basis, the differences do add up. And so, you know, it's a relatively straightforward amount to figure out, okay, I make a hundred thousand today. And let's say that I wanted to cover 18 years worth of risk to my family. Cause I have a two-year-old boom, a hundred thousand times 18 is 1.8 million. Yeah. Bada bing, bada boom, right? Now that's true, but a hundred thousand in 18 years is going to be, have a lot less buying power than a hundred thousand this year. So What? What I like to do is account for like a 4% inflation each year. So I multiply your current lifestyle by a factor of 4% every year. And then I sum all those numbers together. You know, it's not an easy calculation. You may want some of us at BetterWealth to do it for you. You could ask ChatGPT to do it for you if you use the right vernacular. But once again, you might want to ask us at BetterWealth to do it for you so you know it's being done correctly. And the question is, you know, if you died today, what size of a pre-funded asset would your family need tomorrow to cover the $100,000 lifestyle that you helped. build for them at a 4% rise of inflation every year for the next 18 years. They would actually need not a $1.8 million asset, but a $2.5 million asset. So if they put that money inside something like a SPIA, which I can kind of hear some of you in the comments saying already, that number could be a little bit lower because that number is going to grow over time inside the SPIA, but then they're also going to have less flexibility in accessing that entire amount if they wanted to, for any reason, like to buy a home or something. So question, how do you build a $2.56 million asset? if money's tight. Life insurance, ta-da, here we go. The good news is that the way to build such a large safety net has already been invented. It's called life insurance, but how much is the carrier going to let you get on yourself? You can't just invent like... millions of dollars. You can't just decide that you're worth $10 million of coverage. Now, you are made in the image of God and as such, your value is immeasurable, but on earth, your human life value into the insurance carrier, your value is a factor of your age and your income. Now, this is a very, so all the carriers we work with have slightly different ways that they calculate the human life value and kind of what the very slight differences when it comes to the factors and the multiples and whatnot. But this is a very... generally kind of easy way to think about that. So here, once again, income of $120,000. If this person was 18 to 40 years old, then they could get up to $3.6 million of cumulative coverage. If they were 41 to 45 years old, they could do $3 million of coverage. If they were 46 to 55 years old, $2.4 million of coverage. And as you see that earned income multiple over there gets smaller as time goes on. Now, if you were 30 and you've secured 3.6 million of coverage, let's even just, let's even just say you had a permanent insurance product. When you turn 41, they don't knock down the death benefit just because you turned 41. It's just that once you turn 41, you can't ask for more than 3 million unless your income has gone up. And you would obviously have to then, your income would have to go up considerably in order for you to still qualify for 3.6 million at age 41. So If your income doesn't change, then the amount of coverage that you can ask for goes down over time. Now, you can get up to your income-based limit and or with a combination of net worth of life insurance at any given age. So now, upshot of all of this. You know, the purpose of life insurance is to put the correct value on your life. You know, it's essential to capture your human life value. Your family will have more choices if you plan to leave a financial legacy versus if you don't. The peace of mind that life insurance can bring you, you know, even if it's a term policy that evaporates in 20 years, it's immeasurable. So please think about your human life value, how to calculate it. If you want somebody here like me or one of the other wealth coaches, click on the link below, but thank you so much for watching. I hope you tune in another time to see one of these other videos. Bye-bye.
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