Are you aware that the cost of many long-term care services in your home or community are likely not covered by your health insurance or Medicare.
Services like a nursing home, an assisted living facility, a continuing care retirement community, or adult day services are a few examples of services not covered by your Medicare, MediGap, or health insurance. These services can cost up to Continue reading
After you have a plan to handle short-term income disruptions, next you will need to evaluate your financial plan for long-term income disruptions. This long-term income protection can come in the form of long-term disability insurance.
The chances of experiencing a disability that lasts at least six months, before you reach retirement age, is 3 in 10. While a 3 in 10, or 30%, chance may sound low, consider this:
3 in 1,000 (.003%) – The chances that your home & contents will be damaged by fire this year.Today, Life Insurance Awareness is the topic. There will be at least 100 blogs written on this topic today alone to emphasize the importance of life insurance.
I knew I needed to evaluate my personal financial plan once my wife and I decided we were going to start having children. One part of that plan was to make sure our family would be taken care of, financially, if I died before we built up a college fund for our children, had a paid for house, and had enough savings built up so that my wife could raise our children if I was no longer around to provide an income.
At a minimum, anyone who has someone who financially depends on them needs to have life insurance.
While there is no agreed upon standard amount Continue reading
At 29 years old, when I heard my doctor say, “It looks like you have cancer.” The last thing on my mind at that moment was how I would be paying my expenses while I was being treated and recovering from the surgery to remove the cancer. Thankfully I had already planned for an interruption in my income due to an injury or illness.
How To Protect You Income
A short-term disability insurance policy will pay you a portion (50%-70%) of your gross pay (generally tax-free) if you are unable to work due to an illness or injury, for a predefined period of time. This type of insurance, if available, is especially helpful for Continue reading
This year I will save over $400 on my family’s eligible health care expenses and next year you can too! I was able to achieve these savings by signing up for a Medical Reimbursement Account (MRA) during my employers’ annual open enrollment period.
What is an MRA and How Does It Work?
If an MRA is offered by your employer, you can elect to enroll in the MRA during your new hire eligibility period or during the annual open enrollment period. First you will need to estimate how much you expect to spend in eligible health care expenses for the upcoming year and then elect that amount for your MRA. You can use an MRA for numerous items such as co-pays at the emergency room, urgent care center, dentist, your doctor, etc … There are limitations so be sure to review the information provided by your employer. Once you decide on an annual amount, that amount you elected will them be deducted equally from each paycheck, before taxes, and set in a separate account for use during the year for eligible health care expenses.
Important Note: If you do not use all of the money in your MRA by the end of the IRS grace period, your money will be forfeited.
Why Use a MRA?
A big benefit of an MRA is that the total amount you elect is available on the first day on your health plan year. Many employers operate on a calendar plan year, so that is often January 1. For me, this was really helpful when I began experiencing major tooth pain earlier this year. I needed urgent dental care that wound up costing $1,500! I had elected to put $2,000 in my MRA this year which was about $83 per bi-weekly paycheck. So even though when my tooth ache happened I only had contributed less than $500, I was able to pay the entire $1,500 with my MRA. Essentially this was an interest free loan from myself since I have continued to have the $83 deducted bi-weekly from my paycheck. Of course, spending an unexpected $1,500 on dental work forced my family to cut back on some of the non-essential health care costs we had planned.
One last benefit I want to share with you is that the MRA is deducted from your paycheck before taxes are calculated. This means you will be able to pay for medical expenses with money that is not taxed, making your dollar go further and reducing your tax bill. This is how my family will save over $400 this year on our health care costs. Your situation will vary based on your income, marital status, and state taxes.
MRA Example*
| With MRA | Without MRA | |
| Household Annual Income | $45,000 | $45,000 |
| MRA Contribution | - 2,000 | 0 |
| Taxable Income | 43,000 | 45,000 |
| Estimated Federal Taxes | - 5,615 | - 5,915 |
| Sub-Total | 37,385 | 39,085 |
| Social Security Tax | - 3,289 | - 3,442 |
| Sub-Total | 34,096 | 35,643 |
| Health Care Expenses | 0 | 2,000 |
| Net Income | $34,096 | $33,643 |
| MRA Savings vs. No MRA |
$453 |
*Consult your tax adviser for advice specific to your situation.
To make a similar calculation for your exact situation, Aetna has a useful MRA calculator.
Remember, if you are going to spend money on health care expenses – make sure you elect to participate in your employer’s Medical Reimbursement Account. My family will save over $400 this year just by electing this option.
Do you have a question or comment about Medical Reimbursement Accounts?
I wrote a post for On Target Coaching based on my experience and the experience of those I know in the military. Head over to On Target Coaching to read the post – Military & Money: Common Financial Regrets
When I revived my passion for cycling, I realized how much I really enjoyed to ride. So with my new-found enjoyment, I set out to set a goal for myself to complete a 50 mile road ride (on my mountain bike) before my daughter was born. Based on my self-imposed timeline I had three months to train my body for the 50 mile ride.
My Ride
To assist with accomplishing my goal, I used the SMART method. SMART stands for Specific, Measurable, Attainable, Relevant, and Time-Bound. I used this method with my 50 mile bike ride. My goal was to ride 50 miles by August 1. Here is how I applied the SMART system to my goal:
Specific – Yep, I want to ride my bike for a few hours.
Measurable – I can measure the distance traveled and the date completed.
Attainable – While it was a challenge, I thought it was attainable.
Relevant – This mattered to me, so yes it was relevant.
Time-Bound – There was a target date.
With a deadline to accomplish my goal, I needed to train. I rode more than I ever had previously, ate better food, and consumed many gallons of water. And yes, I did achieve my goal, two days before my target of August 1.
Whether your goal is fitness, personal, or financial, using the SMART method to define your goals will help you succeed in reaching them. If you are missing any of the SMART components – you are likely setting yourself up to miss your goal. Here are two examples of weak financial goals and how to improve them.
Weak SMART goal:
Improved SMART goal:
Is there a financial goal you really want to accomplish?
Have you set a SMART financial goal?
Do you have a financial plan?
I read an article recently titled “The Most Important Money Saving Tip.” The tip provided in the article was to “cut monthly expenses by thinking long-term.” After sharing this article with others, I was contacted and asked to provide another important money-saving tip.
I immediately knew another important, but related, money-saving tip: You must have a GOAL! As Zig Ziglar said , “If you aim at nothing, you will hit it every time.”
Each day we are faced with many immediate goals. These come in many forms including hunger, tiredness, money, and health.
Most of these goals are decided for you without you taking any action. However, the further we are removed from survival, the more goals we must develop on our own.
What vs. Why
When it comes to finances, too often we know what to do, when what is really needed is a motivating reason for why to do it. Knowing what to do is not enough – you need a goal. A goal will be there to remind you why you are choosing to spend less than you earn. Your goal may be to retire, buy a car, buy a home, or to increase your S.A.F.E. Regardless of what your goal is, you must have a goal so you have a reason not to buy the iWhatever, the cruise “everyone” is going on, or that “trip of a lifetime.”
Your Decision
You will either choose to make a goal or not. If you choose a goal, you will either reach it or not. Life is full of choices that will result in either a desired goal or an undesired goal – either way your choices will determine if you reach your goal. Yes, there will be obstacles in your path, but how you respond to those obstacles will determine whether you reach you goal or not.
Remember, “… we will also be truly effective only when we begin with the end in mind.” ~Stephen R. Covey
What is your decision? What is you financial goal?
Here are the top 3 personal finance articles from the past week, as selected by your clicks on these articles.
Is there an article you liked this week that didn’t make the list? Add your favorite below.
Have a great weekend!
As the father of a 10 month old daughter & with baby #2 expected to arrive this February, a recent article headline about the cost to raise a child caught my attention.
The article was a summary of a report by the U.S. Department of Agriculture, Center for Nutrition Policy and Promotion, Expenditures on Children by Families – 2011. The report stated that a middle-income family ($59K – $103K) raising a child through age 17 would spend $234,900!
WHAT? Over a quarter of a million dollars before college!
Having a child (soon to be children), numerous nieces and nephews, and friends with children – I wanted to know the details behind this amount. Being a details type of person, I went to the actual 30+ page report to see the assumptions.
What I learned reading over the report is that the report was divided into six categories. The categories, percent of total, and dollar amounts are:
Details
In the details of the report it clarifies that the following costs are specifically excluded from the above amounts: any college costs, any contributions by people outside the household, and any government assistance. I’m glad they clarified that because I was sure those had to be in there.
My Take
Since I am a new parent, I don’t have any real evidence to disagree with the report – but I still disagree in some areas. I will give you my perspective on the six areas.
Housing – Disagree. When my wife and I were single, we each were renting a three bedroom apartment. When we got married, we moved into a three bedroom house. For us, our housing has not changed and was not influenced by children and it will not be until we have more than four or five children. So for my calculations I will not associate the $70,560 with raising a child.
Food – Undecided. By dividing the total, $37,260 by 18 years and again by 12 months – I get approximately $174 per month as the average cost to feed my daughter. I do know that since my daughter has been almost exclusively breast-fed for her first year that we have saved about $2,100 alone in her first year of food expenses. I don’t expect that we will come close to food costs of $174 per month for her for quite a few years.
Transportation - Disagree. Using the method previously described the report calculated the monthly transportation cost of $157. Since my wife came into the marriage with a paid for car and would have a vehicle regardless of if we had a child or not – there is no cost to associate with raising a child. Additionally I traded-down out of my large SUV into a used vehicle before we were married and did so before a child came along – nothing to add here.
Clothing - Agree. This comes out to an average of $63 per month or $750 per year. I think this is a little high but I can see how this may average out over time, especially as she grows rapidly.
Healthcare - Disagree. This comes out to about $88 a month or $1,055 per year. My healthcare is a family plan regardless of how many dependents I have and since I had my wife on my health insurance plan – there is no additional monthly cost. There are annual check-ups, physicals, etc… but those will likely add up to much less than $1,055 annually.
Childcare & Education - Disagree. This comes out to an average of $190 per month or $2,283 per year. In this case my wife has decided to stay at home so the childcare has been minimal the first year. We also plan to home school – so as time goes by our cost of school curriculum may drive this cost up closer to the average but I still think it will be lower than the reported amount.
Miscellaneous - Agree. This comes out to $89 per month or $1,068 per year. Since this category includes personal care, entertainment, and reading materials this category may actually be too low.
I plan to track as much of this as possible over the next few years and will provide updates periodically on our actual costs to raise a child.
What is your take on the report? Do the numbers accurately reflect your family’s costs?
