If you die today, how much will be left to your family?
Will they be a millionaire, just the same, or be further in debt?
A Review on Net Worth
In my article the “Ultimate Measure of Wealth”, I discussed Net Worth.
Net Worth = Assets – Liabilities
Assets are everything you own from cash, investments, houses, cars, to the tiniest personal belonging you have.
Liabilities, on the other hand, are everything you owe from someone else such as bank loans, house mortgage, car loans, credit card debts, and other personal loans.
When we subtract Liabilities from Assets, we get your Net Worth.
If your Net Worth is positive, then well and good.
But if your Net Worth is negative, then you are drowning in debt. (to know more about debt management, read “Breaking the Shackles of Debt”)
If You Die Today, what is Your Net Worth and Who will Receive It?
I can’t place a value on you as a person but when we talk about personal finance, net worth is the measurement of your value.
If you die heavily in debt, all your assets will be distributed in favor of your creditors and nothing will be left for your family. They will also be poorer because their breadwinner or contributor of household income passed away in addition to the emotional loss they incurred.
If you die with a positive net worth, the government will take 6% Estate Tax of the net estate (see “Ultimate Measure of Wealth”) before the family can receive what you have worked for all your life.
We work for a deeper reason other than money. We work so hard to achieve our dreams and for our loved ones. Whether you are single or a family person, your money takes care of someone important to you (your parents, relatives, friends, charity, etc.).
Remember those sleepless nights, sacrifices at work, and the excuses we say to our family members and friends that we can’t attend special occasions because of work? All of those sacrifices will be for nothing if when you are gone and nothing will be left for them.
How to Guarantee your Family will be Millionaires when you are Gone
The answer is through Life Insurance. Life Insurance is the ultimate multiplier.
Life Insurance is the only financial product that can multiply your money a hundred times (depending on age): a P1,500-3,000 per month premium can turn into P1,000,000-P2,000,000 at the time of death.
Hence, if you are only starting in life with an asset lower than P1Million, getting an insurance plan with a premium of P1,500 per month will guarantee that your family will be millionaires if something bad happens to you (depending on age).
Life Insurance is exempted from the 6% estate tax and your creditors can’t run for it.
If you are already wealthy, life insurance will make sure that through a small premium, the 6% Estate Tax will not be paid by your family but by your life insurance proceeds.
As you can see, life insurance is a wealth creation tool. It makes sure that the net worth of your family will not go down through estate tax and the loss of income of the breadwinner or contributor.
It makes sure that what we work for doesn’t go to waste. That even when we are no longer around, we are still there to provide for our loved ones.
So before you say life insurance is not for you, always remember that the ultimate goal of life insurance is not you but your loved ones.
To end, below is the letter of a life insurance policy to its owner:
Your Millennial Wealth Planner,
Harold Q. Gardon, CWP, CEPP
How do you find the article? Do you have any questions? Please feel free to message me if you want me to discuss a particular topic or if you are seeking financial advice.
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