Is Your M.U.G. Covered? This Acronym Can Help Your Financial Future
Things are good. The unemployment rate is at an all-time low, corporations are flush with cash and the stock market has been on a run, the likes of which we may never see again. However, what goes up must come down so while we are optimistic, we are also realistic, which means preparing for potentially less friendly conditions.
There is a powerful financial practice re-emerging called M.U.G. that can serve as a guideline for us all as we do our personal financial planning for the future. M.U.G. stands for Mortgage, Utilities and Groceries. The theory is that in times of financial distress, the first step toward financial recovery will start with ensuring you can pay for these three things no matter what.
When it comes to the hierarchy of needs for basic living, the things you’ll find are:
- Having a roof over your head
- Keeping the lights and heat on
- Putting food on the table
Everything else you can either do without, postpone or find an alternative. Despite positive trends in our economy, there are still looming threats like a trade war with China or stock market crash that could turn your finances upside down. Additionally, losing a job, being victim of a bad accident or even sudden death are some of the sad truths of life that may also affect your finances. So how exactly do you cover the cost of M.U.G. when your chips are down?
The two simplest ways to protect your family and ensure M.U.G is covered are disability income insurance and life insurance.
Disability income is a coverage that many employers provide as an employee benefit. There are variations like short-term disability and long-term disability, but many employers at least cover the latter. This means in the event you are medically deemed “disabled” or unable to work for a qualifying reason, the insurance company will pay you anywhere between 40 - 60% of your pre-tax weekly earnings.
If your employer doesn’t offer long-term disability coverage, individuals can apply and qualify for an individual policy with the help of an insurance advisor. Individual policies, while typically more expensive than employer-sponsored plans, can offer potential reimbursement up to nearly 100% of your take-home pay. They can also be combined with an employer-sponsored plan to cover wages. Disability income can be huge in fulfilling your obligation to provide the M.U.G. essentials for your family.
Joe Yates, CommunityAmerica Insurance Advisor boils it down to this. “Say a person makes $60k a year for the next 20-30 years. That’s $1.2 to $1.8 million. That’s a lot of money to leave on the table to chance. Unless you can figure out a way to quickly replace that income, long-term disability insurance is the only viable solution. Allocating 1-2% of your annual income for coverage is probably a pretty good use of funds. Most people probably pay that much and more for home and auto insurance alone.”
The second part to achieving M.U.G. is through life insurance. If the primary or sole bread winner passes away unexpectedly, it is going to be extremely difficult to pay the mortgage, keep the lights on and put food on the table without life insurance in place to cover the missing income. Disability insurance can’t help in this instance. Life insurance can provide a tax-free income to your family for the rest of their lives and of course go can well beyond covering just the M.U.G. essentials. To cover a healthy 40 year old male for the next 30 years, paying $110 a month will provide his family with $1 million dollars, income tax-free if he passes away unexpectedly during that time.*
If you are interested in exploring a personalized plan to cover your M.U.G., please contact a CommunityAmerica Insurance Agency advisor for a complimentary, no obligation consultation today.
Joe Yates is an insurance advisor with the CommunityAmerica Insurance Agency. He specializes in income protection planning and other ways to make sure your family is taken care of in the face of adversity. To set up a complimentary consultation with Joe, please click the green button below.