Value Matrix: Case Studies (2-4) Required Bloat

It's my understanding that an umbrella only protects your assets up to the limit. If you have a $1 million umbrella policy and someone wins a judgment against you for $2 million, then you will have to pay them the difference. It didn't seem very clear in the episode. Also, no need to even think about cancelling your term life insurance if you are near the end of the term. We have paid about 20 years on policies that are set to expire in 5 years. It would be silly to cancel now after paying for 20 years!

What!?! I could just cancel my term life insurance now that I don’t need it??? I’ve been waiting until it ends in two years but you’re saying I could just quit now???? Mind blown.

Nice timing on the life insurance comments. 15yrs ago we bought a term policy on me for $1mil, and set the goal that we'd be FI when the term ended, so we'd never need to buy another. The policy expired this month, and we don't need to replace it.

Also regarding high-joy giving, we always gave generously to charity on the way to FI, but rarely had bandwidth to donate our time. We always intended to flip that once we reached FI: cut back the monetary giving to quit work as soon as possible, while ramping up our time-donations. But now that we're at FI from a "core expenses" POV, we've realized it's only a bit more time to be able to do both…and not cut back on the donations that our charities really appreciate. And so I'm continuing part-time for just a bit longer in a lower-stress role, and I'll fully stop working once we can continue our giving thru retirement.

Not kidding, my ideal day is walking around town for six hours listening to Brad and Jonathan review budgets. Loved this episode, but 5 hours too short.

To add to my comment about Umbrella policy. I didn't change my homeowner's liability limits, I carry homeowner's insurance more for property damage than liability coverage, liability coverage on a home seems to me to be low risk, but if one is worried about it, they could increased the liability limits of their homeowner's insurance.

Most insurance companies have increased Umbrella coverage premiums. My coverage of $3 million went from $300 to over $700/year. I called to decrease my coverage, but even at $1 million I was quoted over $600/year. I found a work around, cancel the Umbrella policy and instead increase your underlying auto insurance liability limits. I increased my liability limits from $300/500 to $1 million and the premium only increaased $120/year. That's a $580 savings per year!

I listened to this episode this morning while I was out for a walk. The discussion around a car payment made my ears perk up. I appreciate Jonathan's nuance on this. After more than 10 years without a car payment (or really any kind of debt) I bought a new car a couple of years ago and financed it. In my case, the trade in covered about 60% of the value of the new vehicle, so the amount financed was far less than the full purchase price.

The rationale was that I wasn't planning on the purchase way in advance. Because of that I was very light on available cash. So, my options were to sell a big chunk all at once with substantial capital gains (essentially all of taxable brokerage holdings are pre-COVID), or finance at a not terrible interest rate and end up with a $350/month payment. Now, I could certainly pay the loan off at any moment, but I'm in no particular rush as the money benefits more from being invested in the market.

However, all of this made me realize that it might be time to update the FI wisdom around car payments to something like "you are only allowed to finance up an amount that you can truly afford to pay all up front, but choose not to for practical reasons". So, if I'm 40 and everything is in my 401(k), then I don't get to count that, but if I have money in my taxable brokerage and I would really be willing to take out the $25k, $30k, $35k, etc for the purchase, then perhaps I choose to finance instead (e.g., because I got a great interest rate).