Cost/Benefit Analysis

If you have read my blog at all, you know that I am a teacher. I work hard, every day, to help my students learn not only academic content, but life skills as well. I have spent class periods diverging from discussion of the themes of The Odyssey and Hamlet to show students how to apply for scholarships and how to check college/university credit equivalency. (Our high school does have a single academic counselor, but we won’t talk about how over-taxed our school staff is and how we all share roles to make our school a community of learning and growth right now.) I’ve even spent a class period on how to make a simple budget because many of my students are income contributors in their families and they have bills they have to pay each month.

Which brings me to today, and how I spent 15 minutes before school this morning helping a student to navigate his recently created 401k account. My student, M, talked about how his parents have nothing saved and how he’ll have to support them completely soon as they are growing older and have many health problems between them. M is the son of immigrants who came to this country from a war-torn country. His mother has never worked, does not speak English, and culturally is not expected nor wanted by her family to work outside of the home. His father did not complete high school and works long hours in someone else’s store – he never learned about “saving for retirement” because in their home country, it is assumed that the parents will simply live with one of their children until they die. M, however, has.

M has been working in the U.S. for the past two years for a well-known chain retail store. Once he turned 18, (last month), he received some mail that he brought to me about being eligible to contribute to a 401k and he wanted to know what it was. I spent my lunch hour for several days after that helping him to fill out the paperwork and teaching him how to use the internet to search for information about 401k, Social Security benefits, etc. for future use, and showing him several different ways to calculate his personal budget.

After working with M the last few weeks, I have also begun looking far more closely at my own finances as well as our family budget and how we spend and save attempt to save money. I never had anyone mentor me through these topics when I was young and actually had money to invest/put away; everything I have learned about finance was through the School of Hard Knocks. Yet, by the time I began a retirement account in 2010, I had a great deal more financial and personal responsibility than I did ten years ago, working in a profession that is underpaid, making it even harder to put away a significant amount each paycheck.

Fast forward nearly ten more years to 2018 and I have roughly $10k in my 401k, and I’m beginning to truly worry for the future. According to my investment account, this is where I am:

Retirement Calculator March 2018Something tells me that the “milestone” on that sign won’t remotely be enough by the time I am “retirement age” (is that even a thing anymore?). Also…I’m not remotely on track to reach my bare minimum retirement goals:
Hypothetical Retirement Income March 2018
According to these calculations, I will be dirt poor, living under a bridge.

I’m scared. I know that looking too far ahead isn’t healthy because we cannot tell the future, and worrying about it will only negatively affect my mental state and my physical health. This is particularly difficult for me in that I’m a planner, and I need to plan! Being unable to come up with a feasible plan is difficult to deal with as someone with anxiety and depression. Planning helps me to relax and feel more in control of my surroundings, and not being able to come up with a better plan that the current one is upsetting.
Until recently, I was only contributing 1% to my retirement fund. I dropped from a 5% to a 1% contribution in 2013 after I found out that I was pregnant with my first child and we had to begin saving for medical costs, furniture, and diapers. My employer matches up to 3% contribution yearly, so that’s where I have it at for now as we try to use all available funds in our plan to become debt-free by 2021. I know that NOW is the time that I should be saving as much money as possible in order to allow my investment to grow. But when you’re scraping by, living paycheck-to-paycheck, planning financially for the future is an exercise in frustration and sometimes feels like an impossibility.
One of the biggest lessons I took away from my courses in economics is the concept of an  “opportunity cost” (which is also something that I teach to my students at the beginning of each school year). In short, an opportunity cost is a benefit or outcome that could have been received, but was given up in order to pursue another opportunity. For example, if I spend $5.85 every Friday for a Venti Java Chip Frappucino at Starbucks, my opportunity cost is what I could have gained with that money instead:
  • a McDonald’s biscuit breakfast combo with coffee (and I’d have change)
  • a new coloring book and crayons for both of my children (and I’d have change)
  • 2.34939 gallons of gas for the car (at $2.49 a gallon)
  • a gallon of milk (1.99) and loaf of cinnamon swirl bread (2.99) (and I’d have change)

I don’t think about these things constantly or 100% of the time, but I do find that lately I have been weighing opportunity costs more and more in order to try and squeeze more money from our family budget.

Specifically, I’m seriously thinking about dropping AFLAC as a benefit/insurance. I currently carry short-term disability and accident coverage from AFLAC. Thus far, in the three years I have carried the extra insurance it hasn’t paid out a cent to me in wage-benefits when I have had health related illnesses and absences (like my gall bladder removal and extended hospital stay in 2015 for which I filed all the correct paperwork, but somehow did not meet the requirements for wage assistance). Though, it did pay some of my medical bills related to a car accident from November 2015.

This coverage costs me $65.64 a paycheck. $131.28 a month. $1,575.36 each year. So by the end of this school year (June 30, 2018), I will have paid $4,726.08 to AFLAC without seeing a direct benefit from it.

Now, rationally I know that this is smart coverage in that I make the majority of the income for our family and that if something happens to me, we will really be hurting. But the opportunity cost for AFLAC is so high.

  • Bi-weekly, that money could go toward diapers, food, or as an extra payment on a bill to help us get out of debt faster.
  • Monthly, that money could go into my 401k (I could double my current 3% contribution!) helping to reduce my future income gap by increasing the amount currently invested
  • Yearly, that money could go into our savings for a house, which is another one of our long-term goals
I recently had to take 4.5 days (not consecutively, but all within a two-week period) off of work to care for myself and my two children. Between the three of us we had pneumonia, influenza B, and a double-ear infection, some of us with more than one at the same time. Fun! At any rate, the absences cost me over $1000 in lost wages because I did not have enough PTO to cover all of the time. AFLAC doesn’t cover any of that because a) it wasn’t just for me, b) the absences weren’t consecutive, and c) I wasn’t hospitalized.

On the other hand, AFLAC is a preventative cost – so one can’t really weigh the opportunity cost the same way. If I terminate the coverage and then need it in the near future, I’ll be kicking myself. Conversely, since it’s preventative, if I continue working and do not end up needing/using the coverage, there are no refunds, and all of that money that could have been doing so many other things for our family will have been spent for “peace of mind,” but nothing else.

I don’t have an easy answer today, but I do know that the struggling to get by is taking it’s toll on me and by extension, my family, and I’m tired of it.
Yet, for all the exhaustion, I know that I have to keep going. I have to keep finding ways to make it work not just for myself, but for my family.

One thought on “Cost/Benefit Analysis

  1. I found STD insurance to be a scam and an expensive one at that. I broke my ribs a few years ago in a fall. I was out of work 90 days because the pain prevented me from being able to lift the required 50 pounds from floor to shoulder height. My claim was denied because I wasn’t “totally disabled”, despite not being able to fulfill my job requirements and being prevented from returning to work by my employer. Dropped it ever since. Made sure I saved up enough PTO to get me through the 90 days necessary for me to hit our company paid LTD.

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