What I Saw

My current setup leaves me in an okay spot, but that’s assuming I stay healthy and employed. What if something happens to me? Even with my salary increases, I am still not funding all of my goals. I will have to find a way to fund everything in addition to preparing for what may happen if I get sick or die.

I’ve decided to model a couple of “what-if” scenarios to see where I might fall short and figure out what steps I can take to protect my kids financially.

Scenario 1: Short-Term Income Loss
The first scenario I modeled is what would happen if I lost my job for six months, either due to illness or unexpected unemployment.

What I Learned: Gaps in Emergency Planning

This scenario shows me that while I’ve been responsible with my emergency fund, it wouldn’t be enough if I faced more than a few months of income loss. If I am out of work for 6 months, everything would be in danger of not getting funded.  I’d need to consider other options to build a stronger safety net. I am essentially in a danger zone where everything will fall apart if anything bad happens in mine and my children's lives. Clearly, any additional changes, like would make it even more challenging. I think that I need to model the cost of disability services in case I am unable to work, as well as life insurance policies in case I die before the children are of adult age. Aside from insurance, I will see if there are other ways I can funsd my existing goals without altering them.

Scenario 2: Long-Term Disability

Next, I modeled what would happen if I became unable to work for a longer period due to a disability. Here’s how that might look:

Income: In this case, I wouldn’t be able to rely on unemployment benefits. I’d need to apply for disability benefits, which could replace a portion of my income, but only about 60%—roughly $2,500 per month.
Expenses: My rent, utilities, and basic living costs would stay the same, totaling around $2,800 per month. I’d have a $300 monthly gap, not to mention additional medical costs or long-term care.

This scenario shows me that even with disability benefits, my current setup wouldn’t fully protect me or my kids. I’d run out of savings within a few months, and the reduced income would make it hard to keep up with our current lifestyle.

What I Learned: The Need for Disability Insurance
It’s clear from this model that I need to consider long-term disability insurance. With the right policy, I could supplement my income if I were unable to work, reducing the financial burden on my kids. Insurance would help fill the gap and provide some peace of mind.

Life Insurance in Case of Death
This is the scenario that worries me the most—what would happen if I weren’t around to provide for my kids? I modeled what life would look like for Mia and Jacob if I passed away unexpectedly:

Expenses: My kids would need enough money to cover at least 10 years of living expenses, including rent, groceries, schooling, and any additional childcare.
Life Insurance: I currently don’t have life insurance, so if something happened to me, my kids would have to rely on family members or state assistance. My $5,000 emergency fund wouldn’t go far in supporting them long-term.
If I get a life insurance policy that provides at least $500,000 in coverage, this could cover my children’s living expenses for the next 10-15 years, ensuring they can stay in the home, attend school, and have some security.