When I transitioned from a full-time job to being self-employed, one of the biggest hurdles I faced was finding low-cost health insurance. Finding affordable dental insurance proved to be even more difficult. First, I couldn’t find any dental insurance with benefits comparable to what I was getting from my full-time job. Second, even insurance with very basic coverage cost over a thousand dollars per year for two people. Reading the fine print, I discovered that benefits were capped at a thousand dollars! Why would I want such a product? I decided to dig deeper to see how I could find affordable dental insurance and make dental care cheaper. Here is what I found.
How to find affordable dental insurance
- Comparison shop: Like any other type of insurance, start by comparing the coverage and premiums of different plans. Sites like Dentalplans.com or eHealthinsurance.com are good places to start.
- Check with your dentist: A lot of dentists now offer savings plans. My dentist offers a plan called SmileMore Dental Savings Plan. For about $200 a year, I can get as many cleanings as I want (for $10 each), free exams and x-rays. If I want any other procedures done, like crowns or dental implants, I can get them done at a 25 percent discount. If your dental health is very good, this might be a great option.
- Check your alma mater: My school sends me a letter every year asking for donations. The letter always accompanies a list of benefits I receive as an alumnus, one of them being group dental insurance. I asked for a quote using the group discount and found that, while it was not the cheapest, it definitely brought the rate down significantly.
- Check trade-related associations: Are you part of any professional associations? A lot of them offer group discounts for their members. For example, freelancers union offers group dental insurance at a discounted cost to their members. This ended up being the best option for me.
- Have a warehouse club membership? Check their benefits: When I lived in California, I had an option of purchasing dental insurance via Costco. At this time, they only offer this benefit to residents of California. Sams Club doesn’t seem to offer dental insurance, but they have a dental plan that offers a significant discount if you use one of the covered dentists.
- Check the new health care marketplace: Dental insurance is not mandatory, so it is not offered by all the states’ marketplaces. Among the states that offer dental insurance, some include it as part of health insurance and some offer it as a standalone product.
- Work part time for benefits: If I want the best coverage for a reasonable cost, unfortunately, this is the best option. A lot of companies offer insurance benefits for part-time employees. Even if they don’t pay the premium, the group discount alone could save you a lot.
How to lower the cost of dental procedures
- Make use of a Health Savings Plan or Flexible Spending Account if you have access to them.
- Get the procedures done at a dental school: If you don’t mind being treated by students — they will be supervised — you can use dental schools that offer free or discounted care to the public. You can use the American Dental Association site to find a school close to you.
- Negotiate the cost of the procedure: As with any type of medical care, you should never assume the price quoted for a particular service is the final price. Check for the average cost of the procedure you are looking to get done in your area. I used the FAIR Health Consumer and Health Care Blue Book to get an estimate. Ask your dentist to match that amount or give an explanation on why it is different.
- Ask for discounts: Ask your dentist if they offer any discount for paying in cash or paying in full.
- Don’t miss the health insurance deduction if you are self-employed: This is not a way to get cheaper dental insurance; but deducting the premium you pay for yourself and your family from your income will save money in taxes, essentially making the insurance itself a little cheaper.
- Consider free and low-cost health clinics: Some community health clinics also offer dental care on a sliding-fee basis. Call your county health department to find if there are any such clinics nearby.
- Look for special programs: This option will depend on your eligibility. There are organizations like Smiles Change Lives, which connect low-income families with charitable orthodontists. Do some research and see if there are any programs that will help you to make your specific procedure more affordable.
- Go abroad: In some cases it might be worth it to consider crossing the border to get dental care, especially if you are in one of the border states.
- Take good care of your teeth: Prevention is the best way to save money on any health issue. Schedule your regular cleaning and exam once a year (latest research shows once a year is as effective as biannual cleaning recommended by the dentists). Identify problem areas and take care of them before it gets serious.
Have you ever bought dental insurance on the open market? What kind of plan did you purchase? How did you find an affordable option?
It’s hard to find a more romantic topic than banking—but nearly every couple eventually faces the question: Should we combine our money or keep separate accounts?
According to a new survey by TD Bank, the answer is often “both.” Nearly half (42%) of couples with joint bank accounts also keep individual ones.
Independence was the most commonly cited reason for maintaining separate accounts, though women were more likely to value their financial freedom: 43% of women said independence was their top motivation, compared to 34% of men.
20% of couples said they kept separate accounts to make sure they have enough money for individual needs, including emergencies and personal spending. 16% reported convenience when budgeting and paying bills was a significant factor, though men were 38% more likely to say so. Only 7% of couples said they kept individual accounts to maintain their privacy.
The survey also found a number of generational differences in couples’ money habits. Millennials were more likely than older age groups to combine their finances before getting married: 70% of Millennial couples waited to exchange vows before opening a joint account, compared to 88% of duos 55 and older.
Right now, the implications of keeping separate accounts are a little unclear. Some researchers suggest couples are happiest when they combine most, if not all, their money. But those findings might not apply when couples are raising kids together, for example.
Like most money matters, there isn’t a one-size-fits-all approach to joint banking. Our guide to combining finances with your partner explains how to find a system that works best for your relationship.
More stories from LearnVest:
When is the last time you got into a heated argument about cars? Cars in general are not controversial. Yes, there is the odd low-key Chevy vs. Ford thing from days gone by and that sort of thing, but most people generally don’t get worked up about cars, arguing about them after dinner in mixed company.
The Prius Parade
That changed a decade or so ago, when gas prices spiked and the media fueled public outrage over behemoth SUVs like Ford’s Expedition and Chevy’s Suburban. The “darling of the day” solution became the Toyota Prius. Californians were so enthralled with it that they pushed through legislation allowing single drivers to use the carpool lanes if they drove a Prius. If you’ve ever lived in the Bay Area or the L.A./Orange County sprawl, you know there is no ground on earth holier than their freeway carpool lanes. Other than winning the lottery, no fantasy occupies commuters’ minds more than finagling a way to zip along that ribbon of greased lightning while the rest stew in their mobile prisons, stuck listening to talk radio.
The Prius became the first car in eons that people talked about when they met for a little libation, or even just standing in lines. Sales went through the roof and dealers had waiting lists. Hollywood celebrities, always chasing the latest cool, hid their blinged-up Escalades — and Cameron Diaz, Harrison Ford and others made sure cameras saw them driving to the 2003 Academy Awards in their Priuses. (Actually not theirs, just loaners from Toyota, but cameras can’t tell the difference.)
All that chatter made the little car the most controversial thing on four wheels since the Edsel. Everyone seemed to sing its praises.
Not everyone, though. Jeremy Clarkson, on the top-rated British show Top Gear, never missed an opportunity to bash the car and humiliate anybody who confessed to even sitting in one, let alone owning it. The TV show South Park parodied the Prius parade in a 2006 episode, citing its excessive emissions of “smug.” Elsewhere, I read a lengthy rant from someone in the Bay Area incensed by an extreme Prius driver driving less than 20 mph on a freeway, windows rolled up while sweating, obviously minimizing the wind drag of open windows while keeping the AC off. Why he didn’t change lanes and blow by Planet Earth’s last savior escapes me, but that’s not the point.
The point is the Prius excited more passion than any Lamborghini or Yugo ever could, or ever did. And that passion is centered around a lovely word in these quarters: saving. The gas savings make it easy on the planet as well as your wallet.
How much is this saving?
You’ve no doubt read numerous articles and posts claiming the Prius is the best thing since recyclable tissues, and others which say that’s baloney. So, what’s the truth?
There are many variables to skew the numbers this way or that. In fact, most articles I read only selected the numbers they quote to favor their stance. In pursuit of the truth, I took all costs, not just gasoline, over a five-year period, doing my best to track them down from neutral sources (i.e., sources that didn’t have an axe to grind in the debate).
It’s impossible to avoid picking a number not favoring one position or the other, though, so I decided to favor the Prius where there was latitude for choice. For instance, I picked a gas price of $4 a gallon for the entire five years, making the Prius’s fuel economy count for more. (A lower price obviously negates that benefit.) I also used the EPA “City” mileage number in my calculations. Not all miles are driven in city conditions, but I had to pick a number, and that’s the one that favors the Prius the most.
A glimpse at the IRS mileage reimbursement rate components shows the biggest car expenses are:
- Depreciation (they say close to half of all vehicle costs)
- Gas, and
All the other costs add up to roughly the same as insurance, which is not that different from car to car, so I ignored that. (The goal isn’t to determine the total actual cost; it’s to see where and how big the difference is.)
To get depreciation, I looked at three cars from 2009, to get a five-year number:
- Toyota Prius (obvious)
- Toyota Corolla (same company, same size)
- Chevrolet Tahoe (most popular gas guzzler, added just to see how bad it really was)
I found the MSRP of a mid-level model for each car, and then looked up the current Kelley Blue Book private party price for it in “good” condition with 60,000 miles (1,000 miles a month). The difference gives us the depreciation of each car over five years.
For fuel, I assumed 1,000 miles a month, all in the city, at the aforementioned $4 a gallon.
Insurance was a little trickier to get because, in order to give you an accurate quote, all of the online sites like Insurance.com and the individual carrier sites want to know everything from your firstborn to the last time you read a blog (just kidding, but not by much). I am astounded by how many extraneous variables go into car insurance cost — my social security number even makes a difference (they say). I got quotes for each car being the only car, so no multiple-policy discounts. My age, driving record and occupation probably make for more favorable rates than a young delivery driver, but at least it’s the same assumption across the board. Bottom line: Your car insurance rate is affected much more by who you are (and where you live) than by what you drive.
Okay, so what’s the number?
It’s as close to a tie between the Prius and the Corolla as you can get, basically. What you gain in the cost of gas you lose in additional depreciation. (And if you had any illusions that your Tahoe had any redeeming merit in the economy wars, it’s time to go and hide in a corner.)
So, the Prius can be the lowest cost vehicle for you, but not by much. And to get that, you need to:
- only drive in the city
- live in an area with sky-high gas prices,
- not own it too long, because high-mileage maintenance on the Prius is much higher, and
- disregard the higher interest on the higher initial price if you finance a new one.
In real life, odds are a Prius is not going to be as economical for you as a Corolla. In the past decade, the Prius’s advantage has been eroded as almost all cars get better mileage than a decade ago.
In closing, forgive me for not resisting the temptation to note that your friendly government does not intend to let this good work go unpunished. Back when they raised taxes on gasoline, a big justification was that you, miserable gas-guzzling consumer, need to be saved from yourself. Noble public servants that they are, they did their duty by raising gasoline taxes to give you a bigger incentive to conserve precious fuel.
It worked. However, as gas consumption dropped, so did their gasoline tax revenue. Their solution: simply add other taxes. Michigan, for example, is floating the idea of taxing you on miles traveled, in addition to the existing gas tax. Why indeed should they suffer when you do what they want you to? Next time your government tells you they’ll increase your taxes for some social good purpose, ask what will happen if they reach their goal.
While I’m not a fan of all the pharmaceutical advertising on television, I have to admit that they can be brutally frank about disclosing potential side effects. If you take something for chronic indigestion, a variety of things could happen which will make you lose your appetite — which at least would make you less likely to suffer indigestion. If you take something for erectile dysfunction, the assorted side effects could really ruin the mood anyway.
The point is, I know next to nothing about medicine, yet the drawbacks of taking these medicines come through loud and clear in their disclosures. In contrast, credit card disclosures list page after page of numbers and financial terms, but they never really come clean about the possible side effects of credit card borrowing. Perhaps credit card disclosure should not just list a series of numbers and financial terms, but should also include a description of the possible side effects of excessive borrowing.
Toward this end, here is a list of some of those credit card side effects:
- Credit card debt is like bringing back inflation. Inflation over the past year grew at just 2.0 percent; so while the job market remains tough, at least things are not getting much more expensive — unless you charge them to your credit card and do not promptly pay off the balance. Then, the cost of your purchases could grow at a rate of around 13 percent a year, which is the average rate currently charged on credit card balances. This type of cost increase is like bringing back 1970s-era inflation, something which no one is nostalgic about. In fact, the low level of current inflation makes adding credit card interest to your costs especially burdensome by contrast.
- Borrowing creates an exaggerated lifestyle expectation. There are poor, middle-class, and wealthy people who are all content with their lifestyles. What people tend to feel most strongly about is a change in lifestyle, either for better or worse. Borrowing creates the illusion that you can afford a better lifestyle than you really can. Since borrowing cannot be sustained indefinitely, that means at some point your lifestyle is going to have to downshift. This is likely to be felt as more of a hardship than if you had simply maintained a more modest lifestyle all along.
- Borrowing creates a drag on future growth. This is both a macro- and micro-economic concern. From a macro-economic standpoint, a problem overhanging the United States is that huge levels of public and private debt outstanding represent past spending that must be paid for in the future. This will subtract from the money available for future spending, resulting in chronically slower economic growth. Now imagine the same thing on a household level – debts have to be repaid sometime; and when they do, your household budget is going to miss that money.
- A debt burden makes the consequences of a career setback more severe. A common reason people borrow is that they expect things will get better for them financially in the future. When the country was in an era of consistently high employment and steady earnings growth, there might have been some logic to this, especially for younger people. Now though, unemployment has remained stubbornly high, duration of unemployment can be very long, and wage growth has been sluggish. If you have a setback instead of a step forward, what was once a manageable debt burden can quickly drive you to the verge of bankruptcy or foreclosure.
- Debt makes the future something to fear rather than to welcome. One of the things that defines how happy you are is whether you are optimistic or pessimistic about the future. The hope of a better future has traditionally been a characteristic American value, but having a debt burden hanging over you can make the future something you fear rather than enjoy. The problem is not just the size of the burden, but how certain you are about how you will repay it — the bigger the uncertainty, the greater the fear.
- Debt disrupts generational continuity. People living in the same house for decades, the next generation finding jobs near their home towns, and simply having some consistency in their careers and income levels were all things that brought a sense of continuity to American families. These days, a variety of economic disruptions, including debt, have greatly challenged that continuity. Foreclosures, job losses, and business closures have made change — sometimes sudden, drastic change — a fact of life that can split families apart.
Of course, as with pharmaceuticals, credit cards can normally be used safely and effectively. Even so, I’ve seen all of the above side effects play out in the lives of friends and acquaintances. The more people know about the potential side effects of borrowing going in, the more likely they would be to avoid them.
This post comes from Anna Williams at our partner site LearnVest.
College seniors graduating this spring are more optimistic than ever … but should they be?
According to Accenture’s 2014 College Graduate Employment Survey, a full 84% of the class of 2014 believes they will land a job in their chosen field. This group of seniors is hopeful despite the fact that only 67% of 2013 grads have found a position in the area they expected to work in.
At the same time, more than 82% of this season’s grads anticipate raking in at least $25,000 a year in their first jobs. Reality check: Over 40% of recent grads are actually making less than that, the survey found. And by as late as this March, just 11% of the class of 2014 had actually secured a post-college job.
To add to the struggle, not only will these newly minted grads likely be earning salaries below their expectations, but many will be juggling significant student loans as well: one-quarter of college grads will walk off campus with at least $30,000 in debt, the survey found.
Still, this is the most optimistic class in recent years, Katherine Lavelle, a managing directer at Accenture who oversaw the study, told Fortune. One theory? Improving job numbers could be an encouraging sign to college seniors.
There’s nothing wrong with being positive about the future, of course—as long as you have a plan in place to help you get there. If you’re a 20-something on a tight budget, learn the key strategies for using your small salary smartly, and discover how to balance paying off student loans with your other financial priorities.
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If you’re like me, you hold the firm belief that a personal finance site like the one you’re currently visiting should occasionally offer more than the usual advice.
Oh, it’s fine if these posts primarily advance ways to track down the best savings account, how to save on life insurance or find the best zero percent APR credit cards. It’s just peachy if most offer timely tips on how to stage a profitable yard sale, get the best deal on pro sports memorabilia, save money on trips to the dry cleaner and earn a mint recycling common household items over online auction sites.
And of course, it’s terrific if they remind us of practices we’ve long known we should get going on but can’t often rouse ourselves to actually undertake, like investing for our kids’ college educations and our own secure retirement.
But every once in a while, shouldn’t there be a posting that truly saves readers from catastrophe? Should there not be, on the rising of a blue moon, a column that, once they absorb it, spurs readers to bellow, “Oh, my God! Can this be correct!? If it is correct, it may have saved me from being vilified as a doofus or worse by my spouse, children and other heirs, after I pass away.”
It’s that kind of wisdom I hope to dispense in this posting. I was clueless about it myself until a fortnight ago. I later learned many folks, up to and including some in the financial services field, remain similarly uninformed.
Here’s the promised insight. When you establish a retirement savings plan or an annuity or insurance policy, you designate beneficiaries to receive those assets upon your death. Those beneficiary designations take precedence over your will. I repeat, those beneficiary designations trump your last will and testament.
Put another way, you may intend to leave your entire estate to people you name in your will. But they won’t receive a dime of the assets in your insurance policies, annuities and retirement plans if others are named as beneficiaries.
How could this be a problem? Let us count the ways.
Let’s say your former spouse is a blending of Attila the Hun, Benito Mussolini and the devil, all rolled into one. You have been divorced from this person for years if not decades, never want to hear his or her name again and can’t abide the thought of one penny of yours ever falling into this jerk’s grubby little hands.
Your current spouse, the love of your life, is like an angel descended to earth. You sincerely want to ensure your assets go to your life partner upon your demise. You establish in your will that everything you own will go to him or her.
Then you die. And those long-forgotten insurance policy and retirement plan beneficiary designations, which name your original spouse, kick into action.
Your current spouse, the apple of your eye, gets nothing. And that past spouse, like a rat feasting on an uneaten jumbo cheese pizza that somehow missed the dumpster, gets his or her greedy claws on your hard-earned dough. Is there any legacy you’d less like to have attached to your memory after your death?
Just think, if you can do so without passing out, of your despised ex-spouse taking round-the-world cruises, purchasing European luxury sports coupes and buying a vacation home with money you’d planned to leave the love of your life.
As Michael Stuart, member manager of The Stuart Legacy Alliance, LLC, in Rolling Meadows, Illinois, told me recently, “There are hundreds of stories where husbands and wives get divorced, forget to change the beneficiary designations on their life insurance or retirement plans, and then they die. And their money goes to their ex-spouse, rather than to their children or current spouse.”
Gregory DeJong, a financial advisor with Naperville, Illinois, Savant Capital Management, recounts an instance of disaster averted. He recalls making idle chit-chat across a kitchen table with a woman while her husband went into the family files to fetch an insurance policy. After much longer than expected, the husband returned, red-faced, with an insurance policy that named his ex-wife, to whom he had not been married for more than ten years, his beneficiary.
File drawers rattling
I think I can hear some of you right now diving into your file cabinets and hunting frantically through file folders marked “Insurance” and “Retirement ” for insurance policies and retirement plans. As you do, tune in to this additional nugget.
“Not only do beneficiary designations trump the will, but the joint tenancy trumps the will,” Stuart says. “The easiest example is the residence. If you want your house to go to your kids, and you have joint tenancy with your wife, the wills and trusts mean nothing. You can effectively disinherit someone unintentionally.”
We all wish to be fondly remembered after we pass away. We all wish to know our assets will go to those we love when we die. To ensure yours do, check your beneficiary designations as soon as possible.
It could keep those most important to you from awarding you a posthumous designation you’d rather not contemplate.
The summer travel season is almost upon us. In the past, finding good airfare deals used to take the most time, while booking the tickets only took a couple of minutes. Now, it goes like this:
- You spend hours trying to find a good airfare deal and get excited when you find an awesome deal!
- When you go to the site to book the ticket, you spend another half hour going through screen after screen of disclaimers and add-ons. (Five dollars for a soda, ten dollars for the option to choose a seat, twenty dollars for an aisle seat. If you want to take more than a pair of underwear, tack on extra fees for a carry-on bag.) Fee after fee gets piled onto your “great” ticket price.
- At the end of the last screen, your great deal is no longer reasonable. You become so frustrated that you start over, or you simply give up and just want to be done with it but you don’t realize you just agreed to add priority boarding. So to top it off, you have to go through the whole ordeal again!
Travelers are getting smarter. Airlines are getting less money in baggage fees than they did two years ago. U.S. airlines collected $3.35 billion from bag fees in 2013, down 4 percent from 2012. It is the biggest decline since 2008 when charging for checking in a bag became mainstream. These days, travelers use an airline credit card or elite frequent flyer status to work around checked baggage fees; however, airlines are not taking this lying down. They make up for the loss by assessing other fees. For example, they collected $2.81 billion in fees for changing a reservation, a 10 percent increase over 2012. The list of items requiring added fees seems to grow by the day. Here are some examples I found:
- Check-in baggage fees
- Carry-on baggage fees
- Phone or in-person reservation fees
- Seat-assignment fees
- Priority-boarding fees
- More-leg-room fees
- Priority security line
- Priority check-in
- Re-banking frequent flyer miles
- Change of reservation fees
- Using frequent flyer miles
- Flying standby
- Charge for airport agent printing boarding passes
- Charge for printing boarding passes at kiosk
- Award booking fees
- Credit card “convenience” fee. (Allegiant Air adds a $14 surcharge to tickets booked through its website, but waives the fee if you buy them in person at one of its ticket offices.)
- Using the lavatory or the oxygen mask. (No, this one is a myth — at least for now!)
While airlines need to make money, as a savvy consumer, you should be aware of all the possible fees. Before booking a ticket, remember to add them to any fare you see.
How can you avoid these fees, save money and still have a comfortable flight?
There are different means through which a smart traveler can save money. It does take planning and effort. I follow the guidelines below:
- Decide what your priorities are — Do you want the lowest fare or a very comfortable flight without spending any time planning for it? If it is the latter, either book your ticket with an airline that has everything included in the price (my favorite is Southwest with Business Select or with Early Bird check-in) or select all the options you want when you book the flight. This way you will know what your final price is going to be. If you want to save money and don’t mind spending some time preparing, read on.
- Pack smarter to save money — To avoid the check-in baggage fee, people try to squeeze more into their cabin baggage and “personal item.” You don’t have to lug around all the heavy baggage. Shipping to your destination ahead of time might be more economical than checking your luggage, depending, of course, on the distance and weight. If you are shopping specifically for the trip, see if you can directly ship the item to your destination. A lot of hotels will hold the package for your arrival. If you really want to take all the items with you, you can try some smart packing tips — roll instead of fold, pack two to three shirts for each pant and pack smaller items inside larger items like shoes. If you want more packing tips, look at - Real Simple packing tips.
- Get on board early without paying for it — Having an airline credit card still gets you ahead of the general boarding queue, so does being loyal to the same airline. If neither of those options are right for you and your main priority is to get on board early, try grabbing a seat that will put you in the desired boarding group. Each airline has their own boarding style: United Airlines boards window seats first, then middle and finally aisle; US Airways boards people who checked in online before boarding passengers who checked in at the airport; American boards from rear to front, and so do many others. It pays to know how the airline you are traveling on boards, which allows you, during the seat selection process, to pick one that suits your purpose. Here is a good guide on airline boarding: SeatGuru boarding procedure.
- Choose the right credit card — Reward credit cards come in three flavors — cash-back cards, co-branded cards (miles or points specific to a hotel or airline) or hybrid cards, which allow transferable points or miles or points redeemable for cash. If you are going to travel on a single airline most of the time, it might be better to get the co-branded airline card as it most likely comes with a lot of perks such as elite status, free checked bags and priority boarding. If you are not loyal to one airline but still want to get free tickets, go for one of the hybrid cards.
- Rack up points to upgrade — Most airlines will only allow miles flown to count for elite status versus miles accumulated via purchases or doing surveys. That doesn’t mean you should ignore other ways to rack up the miles. Sign up for their credit card when you see a good bonus offer, take their surveys, use the credit card for as many purchases as possible and shop online via the airline’s website. Use these miles to upgrade to business class, which will automatically give early boarding, higher carry-on luggage limits and many other perks.
How do you plan to keep fees in check for your summer travel? What are your tips and tricks?
This post comes from Jen Smialek at our partner site Quizzle.com.
We’ve all been there before: You’ve just broken up with your significant other, and you are heartbroken. Regardless of who did the breaking, it’s never easy to muddle through the next weeks/months of confusion and emotion.
When heartbreak strikes, it can be an equally tough time to manage your finances. If you’re currently working through a breakup of your own, here are a few tips to ensure your financial house stays in-tact:
Give Yourself a Break
First of all, realize that you’re going through a tough time and allow yourself to fully process the emotions you’re feeling. Bottling things up will do you no good (and might just make things worse), so take care to afford yourself some grieving time.
During this time, it’s OK to not track your spending for a few days or to splurge on (small!) luxuries such as a few extra meals out with friends or some new running shoes (physical activity is a surefire way to ease the anguish). It’s even OK to table your financial goals in lieu of some self-care and downtime.
Maintain Your Boundaries
While it’s OK to splurge a bit and loosen the purse strings a tad, a breakup is not a free pass to spend how you wish. It’s not OK to blow through your savings, book expensive travel that you can’t afford, disregard your budget for so long that it simply ceases to exist, or to dig yourself into debt.
Yes, breaking up is hard to do. But remember that this too shall pass and you are worth more than material objects and superficial happiness. While you will be able to work through the breakup, you might take years to recover from the debt you racked up if you allow yourself to lose financial control.
Set Small Goals and Celebrate Your Success
To find the balance between relaxing and maintain your goals, consider breaking any large or daunting goals into smaller, more manageable pieces. If that savings goal you set at the beginning of the year seems to be an insurmountable mountain right now, break it down to a smaller sum that you can sock away weekly.
No matter how small the goal is, you will find confidence and motivation in being able to cross it off your list. Celebrate each and every accomplishment and before you know it, you’ll be back on your feet in no time.
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Time was when you had a home phone and you watched TV with a rabbit-ear antenna. Life was cheap then. Well, almost: I remember paying $3.95 a minute to make a phone call from Orange County to New York. Life may have been cheaper then, but not easier: When you and your significant other got separated in a grocery store, you had to find each other the old-fashioned way.
Then cable television and cell phones were invented. Both were expensive at first, making them the status symbols of the era. Remember how cool that squiggly little antenna was on a car’s rear window? Going to the car wash, you had to unscrew it, and the haves kept them visible on their laps while they waited for their cars. (“Yeah, Sparky, eat your heart out, I have one and you don’t!”)
Gradually, prices came down and it became unthinkable not to have both cable TV and a cell phone. Then old-fashioned capitalism set in: The administration which ordered Standard Oil and AT&T to break up (so we could pay less) was replaced with one allowing those big companies to merge back together again, so we could pay more. How were they going to get re-elected if those big companies couldn’t afford their mega-million-dollar lobbyists and campaign contributions?
Now you have two bloating bills each month (cable and cell) and the smaller bill for your plain, old telephone system line (or POTS line, to use some serious technical jargon).
The recently announced merger between Time Warner Cable and Comcast is the inevitable next step, guaranteed to increase the cost of your communications and entertainment even further. With two recent Supreme Court decisions blessing unlimited corporate campaign contributions, Big Money corporations need more money to pay those increasingly expensive lobbyists to keep politicians happy … and re-elected.
Bad? Its about to get worse.
The head of the Federal Communications Commission (FCC) recently announced planned modifications to “Internet neutrality” which will increase your Internet access cost in one way or another. Net neutrality comes from the legacy POTS system. When you place a call, it doesn’t distinguish who the caller and recipients are. You’re treated the same way as Bill Gates or the homeless person calling from a pay phone. That’s because POTS is considered a common carrier, with strict rules requiring equal access for all.
The Internet is not considered a common carrier, but its providers have been required to abide by net neutrality rules. However, that offers Big Money corporations and their lobbyists no benefit.
They put their heads together (as in Hamilton, Jackson, Washington and Franklin) and set out to fix that. Tom Wheeler is the only person in the world who’s a member of both the wireless and cable industries’ halls of fame for his effective and lucrative lobbying efforts for both industries. Why not get him to head up the FCC? President Obama agreed in November last year.
It took Mr. Wheeler less than three months to serve notice that net neutrality is about to go the way of those squiggly car phone antennas: Big Money Internet providers are about to get some good payback for all those lobbying dollars.
And we all know who pays for that.
WHAT DO YOU DO?
Some have responded to the growing cost of information, communication and entertainment (or “incomen”) by cutting the cord: cutting out cable or satellite television because you can get your entertainment on the Internet.
But … from whom do you get your Internet? For most, it’s the very cable company you want to cut out. They know what you’re doing, so they’re simply changing their plans in a way that your savings from cutting the cord amount to not much more than $10 to $20 a month. Add your payments to Netflix and Hulu, and you’re back where you started, only with fewer channels.
Your best answer comes from looking at the entire bundle of “incomen” you buy and how you pay for it.
It’s the cheapest of your three channels. Incoming calls are free (imagine that) and there are numerous long-distance plans outside of your carrier to make your landline by far the cheapest means of communication. Yet, many are advocating ditching it.
Instead, look for ways to move as much of your communication to this channel. By making a few small changes in how and when you call, you can cut your cell minutes and go to a lower pricing tier.
Most plans have two components: paying for the phone and paying for the service. The major carriers (AT&T, Verizon, etc.) have gotten everyone used to paying for the phone as part of the monthly bill. A $600 iPhone (that’s right, it costs more than a cheap laptop nowadays) “disappears” as $25 per month in your cell phone bill, so you think the phone is free.
It isn’t. Subconsciously you know it, which is why you want to upgrade your phone every two years. Why pay for something and not get it?
Wrong question. Better question: Why pay for it at all? In the early days, phone technology advanced rapidly, and by replacing your phone every two years, the technology jump you made was noticeable.
No longer. The iPhone 4 will be four years old next month and it, like most smart (and dumb) phones of that generation, still work perfectly fine. The difference between old and new is getting smaller with each generation. So there’s no need to replace your (expensive) phone every two years anymore.
In the past quarter, T-Mobile gained more subscribers than all carriers combined, by allowing you to buy your phone (unlocked) and only pay for the usage. Keeping your phone longer will reduce your cell phone bill.
It’s the same as buying a car as opposed to leasing one.
Most plans are tiered, i.e. the more minutes you use, the more you pay. By switching more talking to home phones, you can move to a lower pricing tier. If you want to save more, switch to a prepaid plan, where you never waste any minutes.
Are you paying for data on both your home and cell phone bills? I cut my cell data allowance way down by only using it for GPS purposes and the odd emergency. I wait till I get to the office, home or one of the growing number of free WiFi spots.
As for home Internet usage, expect tiered home Internet pricing to become the norm during the Wheeler term as FCC chief. Until then, it makes sense to concentrate your data usage toward the home.
If you’re a sports nut like me, the cable industry (which includes the big satellite providers) have us where they want us. In that case, your biggest potential for savings lies in rethinking your Internet and voice access.
If you’re not that addicted to television, you’re a prime candidate to make cutting the cord stick, but only if your Internet access doesn’t come through the cable.
Big companies and the government are working to push your cost of access to voice, data and entertainment content ever higher. Rather than just cutting one source, your best bet is to look at the overall picture and and figure out how best to get what you want.
I recently read one of those articles debating whether a million dollars was enough to retire on these days. Mostly, the focus of the article was on the fact that a million dollars isn’t as significant as it used to be due to the impact of inflation. That’s a good point, but it also got me thinking that the size of your nest egg is just one side of the retirement equation.
First, to quickly illustrate the inflation issue, consumer prices have roughly doubled over the past 26 years. That means that a million dollars is worth about what $500,000 was in 1988. To think of this on a forward-looking basis, suppose that inflation continues at a similar rate, which has been pretty moderate compared to longer-term history. If you are around 40 years old today and think you could live on a million in today’s dollars, then you had better count on saving two million because that will have the equivalent purchasing power by the time you reach retirement.
The deceptive thing about the size of a retirement nest egg is that the numbers always sound more lavish than they actually are. Between the erosive effects of inflation and the number of years over which savings have to last, it takes a bigger nest egg than most people intuitively expect to fund a comfortable retirement. But again, as challenging as that is, the size of the nest egg is only one side of the equation.
The other side is the question of how much that nest egg will have to buy, and there are several variables that go into this side of the retirement equation:
- Your mortgage. Your home may be your biggest single asset, but it may be offset by a liability in the form of a mortgage. While some people steadily pay down that liability so it will be gone by the time they retire, others continually renew the liability by borrowing against home equity. This makes a big difference in how big a nest egg you will need. If your mortgage is paid off, you will have much lower monthly costs and an asset you can sell at some point. If you still owe on your mortgage, it will probably continue to be your largest monthly expense.
- Other debt. It’s important to think of your nest egg on a net basis, where its value is offset by whatever you owe. So, if you have accumulated a significant amount of debt, your nest egg may be smaller than it appears. If it’s credit-card debt, that’s even worse than offsetting because you are probably paying more in credit-card interest than you are earning on your retirement savings.
- Where you live. Cost of living varies widely from one part of the country to another, so if you plan to live somewhere expensive, think of this as a form of “instant inflation” that will immediately reduce the purchasing power of your nest egg.
- Lifestyle. What kind of retirement do you envision? Is it a quiet one of reading good books and working in the garden? In that case, a million dollars could still go a long way. On the other hand, if you plan to travel extensively and live it up, you could burn through that million long before you die. Retirement planning should include some rudimentary budgeting based on the lifestyle you plan to lead so you know how far your money has to stretch.
- Social Security projections. Unless you are one of the ever-shrinking number of employees who still has a defined benefit pension, Social Security may be the only regular income stream you have in retirement. The size of that income stream goes a long way to determining how quickly you will spend down your nest egg. You can get a projection of what your benefits will be from the Social Security Administration, based on how long you worked and how much you earned. Getting these projections for yourself and your spouse will help you know how much of your remaining budget your nest egg will have to cover.
- Work prospects. More and more people are augmenting their nest eggs by continuing to work in retirement, but whether or not this is a viable option depends on your health and the marketability of your job skills.
The point is, there is no universal answer to a question like “is a million dollars enough to retire on?” A million dollars may be plenty for some people, and not close to enough for others. It’s not all a question of how rich you want to be, but also of how well you’ve contained the liabilities that are going to offset that million dollars. So, if you want to make sure your retirement savings are sufficient, don’t just go by general benchmarks. You need to do some detailed planning to determine how big a nest egg will meet your specific needs.
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