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Money Problems – Day 2: What’s Going Out?
Today, I continuing the series, Money Problems: 30 Days to Perfect Finances. The series will consist of 30 things you can do in one setting to perfect your finances. It’s not a system to magically make your debt disappear. Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.
I’m not running the series in 30 consecutive days. That’s not my schedule. Also, I think that talking about the same thing for 30 days straight will bore both of us. Instead, it will run roughly once a week. To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.
On this, day 2 of the series, you need to gather all of your bills: your electric bill, your mortgage, the rent for your storage unit, everything. Don’t miss any.
Go ahead, grab them now. I’ll wait.
Did you remember that thing that comes in the plain brown wrapper every month? You know, that thing you always hope your neighbors won’t notice?
Now, you’re going to sort all of the bills into 5 piles.
Pile #1: These are your monthly bills. This will probably be your biggest pile, since most bills are organized to get paid monthly. this will include your credit cards, mortgage(do you rent or buy?), most utilities and your cellphone.
Pile #2: Weekly expenses. When I look at my actual weekly bills, it’s a small stack. Just daycare. However, there are a lot of other expenses to consider. This stack should include your grocery bill, gas for your car, and anything else you spend money on each week.
Pile #3: Quarterly and semiannual bills. I’ve combined these because there generally aren’t enough bills to warrant two piles. My only semi-annual bill is my property tax payment. Quarterly bills could include water & sewer, maybe a life insurance policy and some memberships.
Pile #4: Annual bills. This probably won’t be a large pile. It will usually include just some memberships and subscriptions.
Pile #5: Irregular bills. The are some things that just don’t come due regularly. In our house, school lunches and car repairs fall into this category. We don’t have car problems often, but we set money aside each month so our budget doesn’t get flushed down the drain if something does come up.
Now that you have all of your expenses together, you know what your are on the hook for. Next time, we’ll address income.
Dealing With the Police 101
Last night, a friend called me up and asked me to accompany him to the police station. The police had knocked on his door, waking up his girlfriend while he was out. When he called, they wouldn’t tell him why they wanted to talk to him. Was it an ex trying to make his life difficult or one of his employees getting investigated?
This friend has had a number of interactions with the police, but never learned how to deal with them. Before we left, I gave him a crash course in “stay out of jail”.
Lesson 1: The Police Are Not Your Friends.
During an investigation, you are a suspect. They are looking for a conviction. There may be a “good cop” trying to “help you out”, but he is trying to put you in jail. “Protect and Serve” doesn’t mean you. In general, it means society as a whole. During an investigation, they are serving the interests of the prosecutor.
Generally, they are going to look at you–as the target of their investigation–as the enemy. This is normal. They spend all of their time dealing with scumbags and s***heads. Naturally, they start to assume that everyone who isn’t a cop will fall into one of those categories.
Don’t get pissed when they act rude, ignore you, or anything else. It isn’t a lack of professionalism, it’s just a different profession. They are using interrogation techniques that have been proven successful. Ignore it and focus on Lesson 2.
It will feel wrong to disobey the authority you’ve been taught your entire life to obey. You’re not. You are standing by your rights. Nobody cares about your future more than you do. Certainly not the guy investigating you.
Lesson 2: Your Lawyer is Your Friend.
The second a police interaction starts to look like they are investigating you, demand your lawyer, then see Lesson 4. When you demand an attorney, they stop asking you questions. You can take it back and start talking, so again, see Lesson 4. It’s your attorney’s job to talk to the police and, if necessary, the media. It’s your job to talk to your attorney.
You don’t need an attorney ahead of time. Criminal defense attorneys are used to getting calls at 3AM. It’s part of their job. If you have a low enough income as defined by whatever jurisdiction you are being investigated in, you can get a public defender. That’s better than nothing, but I’d prefer to hire a professional shark, even if it means mortgaging my future. Prison is a big gamble.
Lesson 3. Consent is Your Enemy.
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
“Officer, I do not consent to any search and I would like to speak to my attorney.” Remember this. Memorize it.
They need probable cause, a warrant, or permission to search your stuff. Never agree to it. Don’t stop them if they search anyway, but never, ever agree to a search. If the search is done improperly, your lawyer(see Lesson 2) will get the results of that searched thrown out.
It isn’t possible to get into more trouble for standing by your rights. There is no crime on the books anywhere in the US called “Refused Consent to Search”. Your day will not go worse because you defended your Constitutional rights.
Lesson 4. Shut Up.
I know a few defense attorneys. According to them, most of the people in jail either committed a crime in front of a bunch of witnesses, or they talked their way into jail. Shut up. You’ll want to either justify or defend yourself depending on the circumstances. Don’t. Shut up. It may be one of the hardest things you ever do, but keep your mouth closed. The only thing worse than talking is lying. Don’t lie, just keep quiet.
There is nothing you are going to say that will make your interrogator invite you home for Christmas. He isn’t your friend, you won’t meet his parents, you aren’t going to his birthday party. There is absolutely no win in talking to him. Shut up. The answer to every question is “Lawyer.” If the only thing you say babble is “Lawyerlawyerlawyerlawyerlawyerlawyer”, you’re probably not going to do too badly.
In your car, the dynamic changes a bit, but the principles don’t. When a cop pulls you over, don’t argue. You can’t win an argument with a cop on the side of the road. Be nice, be polite, and as soon as possible, pull into a parking lot and take as many notes about the encounter as you can. If you are planning to fight whatever he pulled you over for, don’t give him any reason to remember you or spin his official report to make you look bad. Again, shut up. Catching a theme?
Gambling With Your Future
If you are being investigated by the police, your future–or some part of it–is on the line. While you are gambling with your criminal record and your freedom, don’t forget that you are an amateur in this arena. The police, the prosecutor, and your attorney are the professionals and the stakes can be huge. Keep your mouth shut, call your attorney, and thank me later.
ING Direct – 2 Day Sale
Today and tomorrow, ING Direct is having a “Financial Independence Days Sale”.
It’s a good sale. If you open a checking account or Sharebuilder account and you’ll get $76. Apply for a mortgage and you’ll get $776 off of the closing costs.
I have accounts at 4 different banks. Two of those were opened for specific debt-reduction purposes. Of the others, one is used for most of my cash flow and bill payments, and the other is ING. As of this moment, I have 15 accounts or sub-accounts with ING Direct.
Opening an account is painless and only takes a few minutes. They are currently offering up to 1.25% in an interest-bearing checking account, though I’ve never qualified for more than .25%. That account comes with overdraft protection, so you are charged interest instead of overdraft fees.
Once you have your first account set up, sub-accounts can be created in literally seconds. Why would you want a bunch of sub-accounts? I have a number of saving goals. Each of these goals has its own account at ING. I can tell at a glance how much we have saved for our vacation next month and far away we are from affording my son’s braces. My kids each have an account here because, currently, the interest rate is at 1.1%, which is miles ahead of most traditional banks. Combined with the convenience of total online control, there’s no contest.
Money transfers are smooth. I use one of my accounts as a transfer account to get money to and from two separate banks.
I also have a Sharebuilder account. For those who aren’t familiar with it, it is a stock brokerage with low fees and a low barrier to entry. If you set up an automatic investment, you get $4 stock trades with no minimum. I’m not aware of any place cheaper.
That all sounds like a lot of ad copy and the links are affiliate links, but the truth is, I am just that happy with ING. I’ve never had an accounting error, or any problems at all.
The downside? Paper checks are verboten. They will not accept paper checks, but you do have a check card to use. You can hit 35,000 ATMS for free withdrawals, but any deposits are held for a few days before you have access to the funds. It can also take 3-4 days to transfer money from ING to another bank. I keep enough in the accounts that I’m always spending or transferring older deposits while I wait for the new ones to clear.
Even if you don’t like the bank, get a checking account, use it a few times and get $76 for very little trouble. Open a Sharebuilder account, buy some stock and collect $76 for it. Without an automatic payment, it will cost you less than $20 to buy, then sell the stock, netting you $56.
Who doesn’t like free money?
Money Problems: Day 9 – Health Insurance
Today, I am continuing the series, Money Problems: 30 Days to Perfect Finances. The series will consist of 30 things you can do in one setting to perfect your finances. It’s not a system to magically make your debt disappear. Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.
I’m not running the series in 30 consecutive days. That’s not my schedule. Also, I think that talking about the same thing for 30 days straight will bore both of us. Instead, it will run roughly once a week. To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.
On this, Day 9, we’re going to talk about health insurance.
The first thing to understand is that there is a difference between health care and health insurance. Health care is what the doctors do. Health insurance is when the insurance companies pay for it. Or don’t. They are not the same thing. I won’t be addressing who should get care or who should be paying for insurance. That’s political and I try to avoid that here.
I won’t spend much time discussing health care as a “right”. It’s not. If a right requires somebody to actively do something for you, it’s not a right. It can’t be. The logical conclusion of requiring somebody to provide you care gets to be a intellectual exercise to be completed elsewhere. That, too, is political.
What I will discuss are the components of a health insurance plan is the U.S. and what to watch out for when planning your insurance coverage.
Premium
This is the amount you pay for your health insurance. For people with employer-sponsored insurance, this is usually paid out of each paycheck, deducted pre-tax. For those with an individual plan, it’s almost always a monthly payment. There generally isn’t much you can do to lower this much. Most employers offer, at most, 2-3 options, ranging from a good plan for a high premium to “we’ll mail you leeches if we think you’re dying” for a much smaller price.
Copay
This is a flat fee paid out of pocket when you get medical care. Depending on your plan and the type of visit, this could be $10-50 or higher. For example, with a plan I participated in recently, the copay was $15 for an office visit, $25 for urgent care, and $100 for an emergency room visit. The office visit and urgent care visit were billed the same amount to the insurance company, so the price difference was entirely arbitrary. Currently, all health insurance plans are required to pay preventative care visits at 100%, meaning there is no copay.
Coinsurance
This is the payment split between the insurance company and the insured. 80/20 is a common split for plans with coinsurance. That means the insurance company will pay just 80% of the bill, until the insured has paid the entire out-of-pocket maximum. After that, the coverage is 100%.
Deductible
This is the amount that an insurance company won’t pay. It has to be covered by the insured before the insurance company does anything. For example, if you have an insurance plan with a $25 copay, 80/20 coinsurance and a $100 deductible, and paying for an office visit costing $600 would look something like this: $25 for the copay, followed by $75 to max out the copay, leaving $500 to be split 80/20 or $400 paid by the insurance company and $100 paid by the insured. That office visit would cost $200 out-of-pocket. The next identical visit would be cheaper because the deductible is annual and doesn’t get paid per incident. That one would cost $115 out of pocket.
HSA
Health Savings Account. For people with a high-deductible plan–that is, a plan with a deductible of at least $1200 in 2011–they are eligible to open an HSA. This is a savings account dedicated to paying medical expenses, excluding OTC medication. It can be used for vision, dental, or medical care. Payroll contributions are taken pre-tax, which makes it a more affordable way to afford major medical expenses. Unfortunately, there are annual contribution limits. Currently $3050 for an individual account and $6150 for a family account. HSAs do not expire, so you can contribute now, and save the money for medical expenses after retirement.
FSA
Flexible Spending Account. This is similar to an HSA, but the contributed funds evaporate at the end of the year. It’s “use it or you’re screwed” plan.
Individual Plans
If you’re not getting health insurance through your employer or another group, you are on an individual plan. These cost more because they A) don’t benefit from the economy of scale presented by getting 50 or 100 or 1000 people on the same plan, and B) you don’t have an employer subsidizing your premium.
Employer-Sponsored Plans
If your employer provides health insurance, you have an employer-sponsored plan. Possibly the fastest way to correct problems with the health insurance industry would be to make individual plan premiums tax-deductible, while eliminating that deduction for employers and letting insurance companies work across state lines. That would eliminate the mutated pseudo-market we have right now, and force the insurance companies to compete for your business. Honest competition is the most sure way to increase efficiency and service while reducing costs. It beats “one payer” or “socialized” care which add overhead to the process and hide the premiums in increased taxes.
Open Enrollment
Most employer-sponsored plans only allow you to make changes at a specific time of the year, unless you have a “life changing event”, like marriage, divorce, death, or children.
Explanation of Benefits
After you use your health insurance, the company will send an EOB, showing you what was billed, what they paid, and what you’ll be responsible for. It’s fascinating to see the difference between what gets billed by the doctor and what the insurance company is willing to pay, by contract. You should read this, to at least understand what you are consuming and how much is getting paid for you.
Maximum Dollar Limit
If your insured care cost more than your maximum dollar limit, or maximum annual limit, the insurance company stops paying. this was supposed to be going away under the Patient Protection and Affordable Care Fraud Act. Unfortunately, if an insurance company offers a crap plan, they have been allowed to apply for waivers based on the fact that they offer a crap plan. The deciding factor in whether the waiver is granted seems to be the amount of the political contributions the insurance company has made to the correct political entities, but maybe I’m just bitter.
Out-Of-Pocket Maximum
This is the most you will have to pay directly with coinsurance. After you pay this amount, the insurance company will cover 100% of expenses, subject to the maximum limit.
COBRA
The Consolidated Omnibus Budget Reconciliation Act of 1985 is, in short, an opportunity to continue your employer-sponsored health plan–minus the subsidy–after you have left the employer. It’s expensive, but it keeps you covered, and will eliminate issue with pre-existing conditions when you get a new plan.
Catastrophic Health Insurance
This is an extremely-high-deductible plan, typically $10,000 or more. For the people who can’t afford coverage, this is insurance-treated-as-insurance. It’s coverage when you absolutely need it, not when you feel a bit ill. $10,000 isn’t a bankruptcy-level bill, while $100,000 usually is. This plan prevent medical bankruptcy for a small monthly fee. For the people who got screwed by a PPAACFA waiver, it bridges the gap between a plan that’s useful for minor things and protection when something goes really wrong.
Things to Watch Out For When Applying For Health Insurance
Now that we’ve looked at the terms you need to understand, we’re going to talk about some things to check before deciding what coverage is right for you.
Individual, Individual + 1, Individual + Family
Do you need coverage for yourself, or yourself and your family? If you and your spouse are both working, make sure to run the math for every possible combination that will cover everyone. Is it cheaper to have one of you cover yourself and the kids, while the other just gets an individual plan?
Maximum annual coverage
It’s really easy to blow through a $3000 annual maximum. If you’ve got a low annual max, look into a supplemental catastrophic plan.
Primary and Secondary Coverage
For years, my wife paid for insurance that covered herself and the kids, while I covered myself. When we were expecting brat #3, I added her to my insurance plan, without having her cancel hers. When the bill came, my insurance plan covered the coinsurance and deductible, which saved us thousands of dollars when the baby was born.
Pre-Existing Conditions
If you’ve got a pre-existing condition, it can be difficult to get insurance if you don’t already have coverage. This makes sense. It prevents someone from corrupting the idea of insurance by waiting until something goes really wrong before getting a plan. Without this, all of the insurance companies would be bankrupt in a year. This is one of the biggest benefits of COBRA. It’s a short-term bridge plan that eliminates the idea of a pre-exisiting condition deadbeat. If you’ve got insurance, you can transfer to a different plan. If you don’t, you can’t.
Homework
Your homework today is to get a copy of the details of your health insurance and look up all of the above terms and situations. How well are you covered? Did anything surprise you?
Make Yourself Accountable
Everybody knows the reputation New Year’s resolutions get for being abandoned in under a month. Following through with your saving and budget goals can be difficult. There are thousands of strategies for keeping your resolutions, but I’ve found that the best goal-keeping mechanism is to make yourself accountable. There are several ways to accomplish this.
Make Firm Goals. If your goals are open to interpretation, it’s easy to interpret them in a way that lets you off the hook. Make the goals concrete and immune to interpretation, and that can’t happen. “Get up earlier” may mean five minutes, which is technically meeting the goal, but not really. “Get up at 5am” is clear and concrete.
Get a “Goal Buddy”. When I am out shopping, if I’m struck by the impulse to buy something I probably don’t need, I call my wife. She’s more than happy to encourage me to put the movie or game back on the shelf. I have a friend who will call me up if he’s thinking about buying a new gadget so I can talk him down. Friends don’t let friends mortgage their futures.
Go Public. As you may have noticed, I’m being as open as possible with my goals for the year. I have laid out clear goals and I provide fairly frequent updates through both this site and twitter. If I fail, I fail in front of an audience. That’s strong encouragement to succeed. Tell your family, friends and coworkers. Announce your goals on the internet. Make it as difficult as possible to fail gracefully.
Punish Yourself. I have a line item in my budget called “In the hole“. If I go over budget one month, the overage is entered as an expense the following month. This serves the double purpose of getting the budget back on track and forcing me to sacrifice something the next month to make that happen. Another option may be to write out a check to a charity you hate, and drop it in the mail if you miss your goal. Anything unpleasant can work as your punishment.
How do you keep your goals?
