What’s your strategy for paying medical bills?
It’s a question anyone serious about protecting their finances must answer. After all, medical expenses are the number one cause of bankruptcy in the country.¹
But there are resources at your disposal. Read on for some strategies to help you lighten the financial burden of medical bills.
Review your bill for mistakes.
Somewhere between 30% to 80% of medical bills contain errors.² Check every bill you receive for any mistakes and report them immediately. You don’t need to pay for medical services you didn’t use!
Negotiate a payment plan.
The scary price tag on your medical bill isn’t always final. Hospitals are sometimes willing to negotiate a lower cost if they’re aware of your financial situation. Contact your healthcare provider and inform them if you’ll struggle to pay the sticker price. Then, ask for price alternatives or for a more lenient payment plan.
Avoid using credit cards for medical bills, if possible.
Using credit cards to cover medical bills can be a critical blunder. Instead of paying a low interest–or maybe no interest–bill to a hospital, you may end up making high-interest payments to your credit card company.
Whenever possible, use cash to pay for medical expenses. That may mean cutting on vacations, not dining out, and holding off on purchasing new clothes until the bill is settled. (Hint: A great reason to keep an emergency fund is to pay unexpected medical bills.)
If none of these strategies make a dent in your medical expenses, consider reaching out to a professional for help. Hospitals and insurance companies sometimes have case workers who can point you towards programs, organizations, and agencies who may be able to help provide some financial relief.
¹ “Top 5 Reasons Why People Go Bankrupt,” Mark P. Cussen, Investopedia, Feb 19, 2023 https://www.investopedia.com/financial-edge/0310/top-5-reasons-people-go-bankrupt.aspx
² “Over 20 Woeful Medical Billing Error Statistics,” Matt Moneypenny, Etactics, October 20, 2020, https://etactics.com/blog/medical-billing-error-statistics#:~:text=80%25%20of%20all%20medical%20bills%20contain%20errors.&text=Some%20experts%20across%20the%20web,between%2030%25%20and%2040%25.
How would your lifestyle change if you earned a raise that doubled your income?
Many people’s reaction would be to increase their expenses to match their new income. Their shopping, housing, dining, and transportation spending would spike if they doubled their paycheck!
But what if they weren’t financially stable before the raise?
Increasing their income wouldn’t solve their financial problems–in fact, it would heighten them! The same proportion of their income would be going towards foolish spending and servicing debt.
The mindset that increases spending as income rises is called lifestyle inflation.
It’s the reason lottery winners often struggle to keep their newfound wealth–If winning the Powerball triples their net worth, they triple their spending. They face the same financial instability as before. The only difference is that they temporarily live in a fancier house!
So what should you do if you earn a raise?
Instead of hunting for an upscale apartment or buying a fresh wardrobe with your new income, consider making no lifestyle changes at all. Instead, use the new cash flow to achieve your short-term financial goals like building your emergency fund and managing your debt.
Next, review your savings goals. How much must you save each month to meet those goals? Once you know the number, set up automatic deposits that contribute that amount into your savings accounts each and every month.
Then, enjoy whatever money is leftover, secure in the knowledge that you’re putting your hard earned income to good use!
If you’re a homeowner, your house can do more than just consume cash flow–it can generate it as well!
Here’s how…
Rent out a unit, basement, or room of your house at a price that helps offset the cost of your mortgage. It’s really that simple!
Let’s consider an example that demonstrates why this strategy is so effective.
Suppose you’ve saved enough money to put a down payment on your first home. Good for you! You’ve done the legwork, and discovered that your mortgage payment will be around $1,000 per month. You’ll also need cash for property taxes and homeowners insurance, too. Even though you’re glad you’re in a home of your own, you might start wondering if you’ve bought a money pit that will consume your cash flow for the next 15 to 30 years.
But you’ve also bought a potential source of income, if you think a little outside the box.
See, your house has a finished basement that’s begging to be transformed into a rentable space. All told, you could rent it out to a friend and put those funds toward your mortgage.
By simply utilizing space that you already own, you can unlock a revenue stream that can help offset your mortgage payments!
That extra cash flow can cover daily expenses, pay down the house faster, or help you begin saving and investing.
This strategy, called “house hacking”, may not be for everyone–it favors homeowners with duplexes or finished basements. Plus, it requires the homeowner to become a landlord, a role some may not care for.
If you have the space, consider renting out a slice of your home to someone you trust. It’s a simple way to leverage resources you already have to generate the cash flow you may need!
Early retirees track both their net worth and annual spending… and you should too!
Why? Because those two pieces of information are critical to evaluating your current financial situation and understanding what separates you from your financial goals.
Retiring early takes meticulous preparation, a willingness to sacrifice temporary comfort, and consistency. Every financial decision must effectively move you closer to your goal or you run the risk of failure.
Ignorance about your net worth hampers your ability to make certain financial decisions wisely. It may cause you to save less, if you assume your net worth is closer to your retirement goal than it actually is. When the time comes to retire, you’ll be in for a shock!
Failing to monitor your expenses can lead to a similar outcome. What if you never identify the expenses that eat up the majority of your cash flow? You might swear off lattes or designer clothes, but you might miss bigger saving opportunities. There’s a reason that so many early retirees cut back on housing, transportation, and food–they’re the biggest drains on cash flow!¹
Here’s the takeaway—imitate early retirees and regularly evaluate your net worth and spending, regardless of when you plan to retire.
Knowing what you’re worth and what’s eating up your cash flow empowers you to make effective decisions that bring you closer to your lifestyle goals.
What’s your financial status? How close are you to achieving your goals? And what’s standing in your way?
¹ “17 habits of self-made millionaires who retired early,” Hillary Hoffower, Insider, Oct 13, 2020, https://www.businessinsider.com/self-made-millionaire-early-retirement-habits-2019-12
Is your credit score costing you money?
A recent survey found that increasing a credit score from “Fair” to “Very Good” could save borrowers an average of $56,400 across five common loan types like credit cards, auto loans, and mortgages.¹ That’s roughly $316 in extra monthly cash flow!
If your credit score is anything but “Very Good,” keep reading. You’ll discover some simple strategies that may seriously help improve your credit score and increase your cash flow.
Pay your bills at the strategic time.
Credit utilization makes up a big portion of your credit score, sometimes up to 30%.¹ The closer your balance is to your credit limit, the higher your credit utilization. The lower your utilization, the less you’re using your available credit. Creditors view a lower utilization as an indicator that you’re responsible with managing your credit.
Here’s a simple way to lower your credit utilization–ask your creditors for when your balance is shared with credit reporting agencies. Then, automate your bill payments to just before that day. When credit reporting agencies review your balances, they’ll see lower numbers because you just paid them down. That can result in a lower credit utilization and a higher credit score!
Automate debt and bill payments.
Late payments for your credit card bill, phone bill, and utilities can negatively affect your credit score. If you have a habit of paying your bills late, consider automating as many of your payments as possible. It’s a convenient and simple way to make your finances more manageable and help increase your credit score in a single swoop!
Leave old credit accounts open.
So long as they don’t require a monthly fee, leave old and unused credit accounts open. Any open line of credit, even if it’s unused, increases the amount of available credit you have at your disposal. And not using that credit lowers your overall credit utilization, which can help increase your credit score.
Closing unused credit accounts does the opposite. It lowers your available credit and spikes your credit utilization, especially if you have large balances in other accounts. So if you have credit cards you don’t use anymore, leave those accounts open and hide the cards in a place where they won’t tempt you to start spending!
The best part about these strategies? You can act on them all today. Ask your creditors when your balance is shared with credit reporting agencies, then automate your deposits to go through right before that day.
When you’re done automating your payments, put your unused credit cards into a plastic bag and put them deep into your freezer. In just a few hours, you’ll have set yourself up to increase your credit score and save money!
Is your budgeting system slowing your financial progress?
It’s not hard to tell if it is. Consistently ignoring your budget and failing to see results like increased cash flow and reduced debt could be indicators that something’s wrong.
Fortunately, it’s not hard to streamline your budgeting process. Here are two simple steps you can take to make your budget more manageable and more effective.
Prioritize your short-term budgeting goals
Splitting your cash flow between non-discretionary spending, savings, your emergency fund, and debt reduction may make you feel like you’ve got all the bases covered, but spreading yourself too thin might actually be diminishing the power of your money. It creates a house of cards that’s waiting to collapse!
Instead of trying to knock out everything at the same time, your budget should reflect your current financial situation. Prioritize where you put your money for the goal you’re trying to achieve. Start by putting all your excess cash flow towards an emergency fund. Then, target your debt. And finally, start directing your income towards building wealth. You’ll more effectively clear the obstacles that block the way towards financial independence.
Automate everything
What if there were a way to automatically make wise financial decisions without even thinking about it? That’s the power of automation.
Once you’ve determined your short-term budgeting goal, set up automatic deposits that move you closer towards achieving it. If you’re building an emergency fund, set up an automatic transfer from your checking account to a high-interest savings account every payday. You can do the same with essential bills and utilities as well.
Once you prioritize and automate your budget, there’s a great chance that you’ll see real progress towards your goals. And once you see progress you’ll feel empowered, maybe even excited, to keep pushing towards building wealth and creating financial independence.
The financial advantage gap between having a college degree and just having a high school diploma is widening!
As of 2019, the average college graduate earned 75% more than the average high school graduate.¹ When you crunch the numbers, it’s actually a more robust investment than stocks or bonds.
This income difference is making saving for retirement difficult for millennials without a college degree. According to the Young Invincibles’ 2017 ‘Financial Health of Young America’ study, millennial college grads – even with roadblocks like student debt – have saved nearly $21,000 for retirement.² That’s quite a lot more as compared to the amount saved by those with a high school diploma only: under $8,000.
However, a college grad may encounter a different type of retirement savings roadblock than a reduced income – student loan debt. But the numbers show that even with student loan debt, the advantages of having a college degree and a solid financial strategy outweigh the retirement saving power of not having a college degree.
Here’s an issue plaguing both groups: more than two-thirds of all millennial workers surveyed do not have a specific retirement plan in place at all.³
Regardless of your level of education or your level of income, you can save for your retirement – and take steps toward your financial independence. Or maybe even finance a college education for yourself or a loved one down the road.
The first step to making the most of what you do have is meeting with a financial advisor who can help put you on the path to a solid financial strategy. Contact me today. Let’s get your money working for you.
¹ “College grads earn $30,000 a year more than people with just a high school degree,” Anna Bahney, CNN, Jun 6, 2019, https://www.cnn.com/2019/06/06/success/college-worth-it/index.html
² “Financial Health of Young America: Measuring Generational Declines between Baby Boomers & Millennials,” Tom Allison, Young Invincibles, Jan 2017, http://younginvincibles.org/wp-content/uploads/2017/04/FHYA-Final2017-1-1.pdf
³ “Retirement Plan Access and Participation Across Generations,” Pew, Feb 15, 2017, http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2017/02/retirement-plan-access-and-participation-across-generations
Metal roofs might just be the best way to put a roof over your head.
And not just because the sound of rain hitting metal is incredibly relaxing. They clobber traditional asphalt shingle roofing in several critical categories. Read on to discover why a metal roof might be right for you!
They last for decades
A properly installed metal roof can last up to 70 years.¹ That absolutely clobbers asphalt roofing, which typically lasts only 12 to 20 years. Make no mistake–20 years is a long time. But a metal roof has the potential to be the only roof you’ll ever need installed.
Plus, they tend to be more durable than traditional roofs, meaning they require less total upkeep and preserve the resale value of your home.
They’re more energy efficient
It’s understandable if you’re concerned that a metal roof would transform your house into a walk-in oven. It seems like they would absorb so much heat and radiate it throughout the house, right?
But it turns out that they actually reduce cooling costs by up to 25%.² Instead of absorbing radiation, a metal roof actually reflects heat and light away from your home. That means you can stay cool without having to crank up the air conditioner!
They handle extreme conditions
Metal roofs tend to perform better in the face of extreme weather and natural disasters. For instance, steel and aluminum won’t catch fire if they’re struck by lightning or embers from a fire land on them. And if you’re more concerned about hurricanes than forest fires, a metal roof will still have you covered–they can withstand gusts of wind up to 140 miles per hour!³
But be warned–installing a metal roof is a skill-intensive process that can cost up to 10 times more than traditional roofing.² Before you decide to remodel your home, it’s critical to find a roofer who’s well-reviewed and qualified to do the job right. It’s also worth considering how long you’ll stay put. A metal roof might make more sense on your forever home than it would on a small starter home.
Research the costs and benefits, identify the style and materials you want for your roof, and, if you decide to go through with it, seek out a qualified contractor. Then, sit back, close your eyes and enjoy the sound of rain gently falling on your brand new metal roof!
¹ “Pros and cons of metal roofs for your home,” State Farm, https://www.statefarm.com/simple-insights/residence/metal-roof-pros-and-cons
² “7 Things to Know Before Choosing a Metal Roof,” Donna Boyle Schwartz and Bob Vila, Bob Vila, https://www.bobvila.com/articles/metal-roof-pros-and-cons/
³ “Standing Tall in Hurricane-Force Winds with a Metal Roof,” Liquid Creative, Gulf Coast Supply and Manufacturing, Apr 8, 2019 https://www.gulfcoastsupply.com/standing-tall-in-hurricane-force-winds-with-a-metal-roof/#:~:text=Metal%20roofs%20can%20be%20a,are%20prone%20to%20blow%2Doffs.&text=In%20wind%20uplift%20tests%2C%20metal,gusts%20up%20to%20180%20mph.
How many things do you worry – er, think – about, each day? 25? 50? 99?
Here’s an opportunity to check at least one of those off your list. Read on…
Think back to when you were involved in the loan process for your home. Chances are good that at some point during those meetings, a smiling salesperson mentioned “mortgage protection”.
With so many other terms flying around during the conversation, like “PMI” and “APRs”, and so much money already committed to the mortgage itself – and the home insurance, and the new furniture you would need – you might have passed on mortgage protection.
You had (and hopefully still have) a steady job and a life insurance policy in place, so why would you need additional protection? What could go wrong?
Before we answer that, let’s clear up some confusion.
Mortgage Protection Insurance is not PMI.
These two terms are often used interchangeably, but they are not the same thing.
Both Private Mortgage Insurance (PMI) and Mortgage Protection are insurance, but they do different things. PMI is a requirement for certain loans because it protects the lender if your home is lost to foreclosure.
Essentially, with PMI you’re buying insurance for your lender if they determine your loan is more risky than average (for example, if you put less than 20% down on your home and your credit score is low).
Mortgage protection, on the other hand, is insurance for you and your family – not your lender.
There are several types of mortgage protection, but generally you can count on it to protect you in the following ways:
- Pay your mortgage if you lose your job
- Pay your mortgage if you become disabled
- Pay off your mortgage if you die
Say, That Sounds Like Life Insurance.
Not exactly. Mortgage protection actually can cover more situations than a life policy would cover. Life insurance won’t help if you lose your job and it won’t help if you become disabled. Mortgage protection bundles all these protections into one policy – so you don’t need multiple policies to cover all the problems that could make it difficult to pay your mortgage each month. (Hint: A life insurance policy would be a different part of your overall financial plan and often has its own separate goals.)
How Does Mortgage Protection Work?
A mortgage protection policy is usually a “guaranteed issue” policy, meaning that many of the roadblocks to purchasing a life insurance policy, such as health considerations and exams, wouldn’t be there.
If you lose your job or become disabled, your policy will pay your mortgage for a limited amount of time, giving you the opportunity to find work or to make a backup plan. Again, your house is saved, your family still has a roof over their heads, and you’re a hero for thinking ahead. Accidents happen and people lose their jobs every day. Mortgage protection is there to catch you if you fall.
One More Thing…
A mortgage protection policy is a term policy, so you don’t need to keep paying premiums after your house is paid off.
Now that you know a little bit more about mortgage protection policies, have those 99 worries ticked down to 98? Reaching out to me for guidance on your financial worries could help you make that number smaller and smaller… 97… 96… 95…
I don’t know about you, but most people don’t like exams – either taking one or having one done to them.
But there’s no need to panic over your life insurance medical exam (yes, you’re probably going to have one). I’ve got some steps you can take before the “big day” to help prevent readings which may skew your test results or create unnecessary confusion.
One important thing to keep in mind is that the exam’s purpose isn’t to pass or fail you based on your health. Your insurer just needs to understand the big picture so they can assign an accurate rating. Oftentimes, the news can be better than expected, and generally good health is rewarded with a lower rate. Alternatively, the exam might uncover something that needs attention, like high cholesterol. That might be something good to know so you can make necessary lifestyle changes.
Think of your exam as a big-picture view. Your insurer will measure several key aspects of your health. These areas help determine your life insurance class, which is simply a group of people with similar overall health characteristics.
Your insurer will most likely look at:
- Height and weight
- Pulse/blood pressure tests
- Blood test
- Urine test
Tests can indicate glucose levels, blood pressure levels, and the presence of nicotine or other substances. Body Mass Index (BMI) – a measurement of overall fitness in regard to weight – may also be measured as part of your life insurance exam.
So let’s find out what you can do to prepare for your exam!
The most obvious cause that could affect your results is medications you’ve taken recently. These will probably show up in your blood tests. Bring a list of any prescription medications you’re taking so your insurer can match those to the blood analysis.
Over the counter meds can interfere with test results and create inaccurate readings too, so it might be best to avoid them for 24 hours prior to your medical exam if possible. Caffeine can cause spikes in blood pressure.¹ Limit your caffeine intake or avoid it altogether, if possible, for 48 hours prior to your exam. Smoking can elevate blood pressure as well.²
Alcohol has a similar effect on blood pressure. Try to avoid alcohol for 48 hours prior to taking your life insurance medical exam.³ Some types of exercise can also spike blood pressure readings temporarily.⁴ If you can, avoid strenuous exercise for 24 hours before your medical exam.
Some types of foods can create false readings or temporarily raise cholesterol levels.⁵ It’s best to avoid eating for 12 hours prior to your exam, giving your body time to clear temporary effects. Scheduling your exam for the morning makes this easier.
Stress can affect blood pressure readings.⁶ (Surprise, surprise.) Try to schedule your life insurance medical exam for a time when you’ll be less stressed. After work might not be the best time, but maybe after a good night’s rest would be better.
Have any further questions on how you can prepare for your exam? I’m here to help!
¹ “Caffeine: How does it affect blood pressure?,” Sheldon G. Sheps, M.D., Mayo Clinic, Jan, 26, 2019, https://www.mayoclinic.org/diseases-conditions/high-blood-pressure/expert-answers/blood-pressure/faq-20058543
² “Smoking, High Blood Pressure and Your Health,” American Heart Association, Oct 31, 2016, https://www.heart.org/en/health-topics/high-blood-pressure/changes-you-can-make-to-manage-high-blood-pressure/smoking-high-blood-pressure-and-your-health#.Wrz8uNPwZTZ
³ “Short-term Negative Effects Of Alcohol Consumption,” BACtrack, https://www.bactrack.com/blogs/expert-center/35042501-short-term-negative-effects-of-alcohol-consumption
⁴ “Does Exercise Raise Blood Pressure?,” Barrett Barlowe, SportsRec, Nov 28, 2018, https://www.sportsrec.com/6277164/does-exercise-raise-blood-pressure
⁵ “How to Prep for a Cholesterol Test,” Vanessa Caceres, Livestrong.com, Apr 29, 2020 https://www.livestrong.com/article/326114-what-not-to-eat-before-cholesterol-check/
⁶ “Managing Stress to Control High Blood Pressure,” American Heart Association, Oct 31, 2016, https://www.heart.org/en/health-topics/high-blood-pressure/changes-you-can-make-to-manage-high-blood-pressure/managing-stress-to-control-high-blood-pressure#.Wr0OsdPwZTY
First of all, what is insurable interest?
It’s simply the stake you have in something that is being insured – and that the amount of insurance coverage for whatever is being insured is not more than your potential loss.
To say things could become a bit awkward might be an understatement if your insurable interest isn’t considered before you’re deep into the planning phase of a project or before you’ve signed some papers, like a title or a loan.
It’s better for your sanity to understand insurable interest beforehand. Where the issue of insurable interest often arises is in auto insurance. Let’s look at an example.
Let’s say you have a car that’s worth $5,000. $5,000 is the maximum amount of money you would lose if the car is stolen or damaged – and $5,000 would be the most you could insure the car for. $5,000 is your insurable interest.
In the above example, you own the car, so you have an insurable interest in it. By the same token, you can’t insure your neighbor’s car. If your neighbor’s car was stolen or damaged, you wouldn’t suffer any financial loss because it wasn’t your car.
Here’s where it might get a little tricky and why it’s important to understand insurable interest. Let’s say you have a young driver in the house, a teenager, and it’s time for him to go mobile. He’s been saving up his lawn-mowing money for two years and finally bought the (used) car of his dreams.
You might have considered adding your son’s car to your auto policy to save money – you’ve heard how much it can cost for a teen driver to buy their own policy. Sounds like a good plan, right? The problem with this strategy is that you don’t have an insurable interest in your son’s car. He bought it, and it’s registered to him.
You might find an insurance sales rep who will write the policy. But there’s a risk the policy won’t make it through underwriting and – more importantly – if there’s a claim with that car, the claim might not be covered because you didn’t have an insurable interest in it. If you want to put that car on your auto insurance policy, the car needs to be registered to the named insured on the policy – you.
Insurable Interest And Lenders
If you have a mortgage or an auto loan, your lender is probably listed on your policy. Both you and the lender have an insurable interest in the house or the car. Over time, as the loan is paid down, you’ll have a greater insurable interest and the lender’s insurable interest will become smaller. (Hint: When your loan is paid off, ask your agent to remove the lender from the policy to avoid any confusion or delays if you have a claim someday.)
Does Ownership Create Insurable Interest?
Excellent question! It might seem like ownership and insurable interest are equivalent – they often occur simultaneously. But there are times when you can have an insurable interest in something without being an owner.
Life insurance is a great example of having an insurable interest without ownership. You can’t own a person – but if a person dies, you may experience a financial loss. However, just as you can’t insure your neighbor’s car, you can’t purchase a life insurance policy on your neighbor, either. You’d have to be able to demonstrate your potential loss if your neighbor passed away. And no, it doesn’t count if they never returned those hedge clippers they borrowed from you last spring!
Now you know all about insurable interest. While insurable interest requirements may seem inconvenient at times, the rules are there to protect you and to help keep rates lower for everyone. Without insurable interest requirements, the door is open to fraud, speculation, or even malicious behavior. A little inconvenience seems like a much better option!
So you’ve got a chunk of change and the know-how to put your money into an account that earns compounding interest.
How long does it take for your money to double in that account? Well to find this out you need two things: your balance and your interest rate. Now, like most things there’s an easy way to find your answer and a hard way. The hard way involves taking the logarithm base 10 of 2. Two as in, two times our balance over the logarithm base 10 of 1 plus our interest rate. (Apologies for causing any unnecessary math class flashbacks.) Since most of us don’t have bionic brains, we can’t really crunch numbers like these in our heads.
The simple way to make an educated guess about how long it takes for your money to double in a compound interest account? The Rule of 72.
The way it works is surprisingly easy (and won’t require a graphing calculator). All you do is take the number 72 and divide it by your interest rate. That’s it! It really is that straightforward. The number you get equals the number of years it’s going to take to double your money.
Let’s try it out: Say you have $5,000 in your account earning 4% interest. Now take that magical number 72, take your interest rate of 4%, pull out your phone and text your 2nd grade cousin and ask him how many times 4 goes into 72. He’s a bright kid, so he’ll tell you the answer is 18, and you’ll tell him that he just helped you learn that it will take 18 years for your initial $5,000 to double into $10,000.
Using the Rule of 72, it’s easier to see how small changes in interest rates can make a huge difference in earning potential. A 29-year-old earning 4% compounding interest can expect his account to double twice by the time he’s 65. At 8%, it doubles 4 times. At 12%, it doubles 8 times. So by doubling your interest rate from 4% to 8% you actually quadruple your money. And by tripling your rate from 4% to 12% you sixteentuple your money. That’ll work.
Interest rates matter. The Rule of 72 shows just how much they matter. So how many doubling periods does your nest-egg have before you retire? Now you know the easy way to find out.
Would you rather have a million dollars cash – or – a penny that doubles every day for 31 days?
If you’re eyeing that million dollar suitcase of cash, you’re not alone. Many go ahead and just take the million. Shoot, people don’t even stoop to pick up pennies in parking lots any more, right?
Well, hold on there, Daddy Warbucks. Before you flick that little copperhead in your change jar and run off on your shopping spree, check this out! The total of a penny doubling every day for 31 days equals (drumroll please) over $10.7 million!
Are you regretting not choosing the penny?
By day 31, one cent has become over ten times the value of the million dollar cash lump sum. That’s the power of exponential growth – the pure power of compounding.
So how can you apply the power of compounding in your personal financial strategy? It’s unlikely you’ll find someone willing to double your money (in fact, be wary of anyone claiming they can). But you can find effective strategies that leverage compounding through interest rates.
Contact me, and let’s talk about how to put the power of compounding to work for you.
If you’re already eyeing the perfect recliner for your retirement, hold that thought. And you might want to start rifling through the ol’ couch cushions for a little extra change…
Here’s a doozy: women age 65 and older are 80% more likely to be impoverished than men of the same age.¹
That number represents a staggering degree of human tragedy. But there’s a sad logic to it when you consider that women save 43% less for retirement than their male counterparts.¹
But that’s not all. According to the 2016 Financial Finesse Gender Gap in Financial Wellness Report, to retire at age 65 (without a career break):
- Men need $1,559,480.
- Women need $1,717,779.
Women have to come up with $158,299 more! This increase is due to the unique set of circumstances women face while preparing for retirement:
- Women live longer
- Women pay more for healthcare
And remember, that report was released before a global pandemic and inflation reshaped the economy. How much more will you have to save to retire in today’s world?
To summarize, women all too often aren’t in a position to save as much as men, even though they need more to sustain their retirements. The tragic result is that many spend their retirements in poverty instead of living out their dreams.
But that doesn’t have to be your story. The savings gap may seem huge, but it can be bridged. And it all starts with a solid insurance strategy. Just think of it as pulling the footrest lever on your dream retirement recliner!
Your unique situation and goals all factor into how you want to kick back when you retire. I’m here to help. When you have a moment, give me a call or shoot me an email.
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¹ “3 Alarming Stats About Women’s Retirement Savings,” Kailey Hagen, The Motely Fool, Jul 24, 2019, https://www.fool.com/retirement/2019/07/24/3-alarming-stats-about-womens-retirement-savings.aspx#:~:text=Fidelity’s%20latest%20retirement%20healthcare%20survey,65%2Dyear%2Dold%20man.
Are you afraid to fix your finances?
It’s understandable if you are! Confronting a bad spending habit or debt problem can feel overwhelming and uncomfortable.
But leaving financial issues unresolved is never a good idea. Little annoyances become serious threats if you don’t take initiative to nip them in the bud!
Fortunately, there are dozens of simple financial decisions that you can make today. Here are some of the most important ones!
Save anything you can, no matter how small
If you stash away a single dollar, you’re already ahead of the game. Half of all Americans had zero dollars (you read that correctly) saved before the COVID-19 pandemic started in 2020.¹
Anything that you’ve put away where you can’t spend it is a good thing, even if it’s a dollar. Putting money away regularly is even better. You might literally have only $1 to start. That’s fine! It’s the thought (i.e., habit) that counts, and you’ll already be closer to financial stability than many people in the country.
Don’t gamble
Americans might not be great at saving, but we sure do love playing the lottery! We spend, on average, $1,000 per year on precious tickets and scratch-offs.² Yikes! You’ll probably get struck by lightning or crushed by falling airplane debris before you win a powerball.³
If you don’t play the lottery now, don’t start. If you do play (which should fall in your budget under “fun fund”), write out how much you’ve spent on tickets vs. how much you’ve won. That’s a ratio to always keep in mind!
Eat at home
Regularly eating out can devour your income. We spend about $232 monthly at our favorite restaurants, or about $2,784 annually.⁴ There’s nothing wrong with occasionally enjoying a meal out at your favorite spot. But it becomes a problem when you’re eating out multiple times a week and using fast food as a substitute for cooking for yourself while your budget goals suffer.
So instead of hitting up a drive-thru tonight, go to your local grocery store and buy some fresh ingredients. It doesn’t have to be complicated or fancy. Ground beef and pasta or chicken curry with rice are both great (and tasty) ways to start. Check out some online recipes and try some new dishes!
Just trying these three simple things can put you ahead of the curve. They might seem small, but you’ll take a huge step forward to financial independence. Choose one of these actions and try it out today!
¹ “Here’s how many Americans have nothing at all in savings,” Ester Bloom, CNBC Make It, Jun 19 2017, https://www.cnbc.com/2017/06/19/heres-how-many-americans-have-nothing-at-all-in-savings.html
² “Americans spend over $1,000 a year on lotto tickets,” Megan Leonhardt, CNBC Make It, Dec 12 2019, https://www.cnbc.com/2019/12/12/americans-spend-over-1000-dollars-a-year-on-lotto-tickets.html
³ “The Lottery: Is It Ever Worth Playing?,” Investopedia, Jul 28, 2022 https://www.investopedia.com/managing-wealth/worth-playing-lottery/
⁴ “How Much Should I Budget for Eating Out?,” Erin Lowell, The Simple Dollar, Jan 26, 2022, https://www.youneedabudget.com/do-you-spend-too-much-eating-out-try-this/
How are you protecting your income?
Maybe you already have a life insurance policy worth about 10 times your annual earnings. That should help protect your family in the case of your untimely passing.
But what if you aren’t able to work during your lifetime?
It’s more common than you might think. 1 in 4 20-year-olds will become disabled before they reach 67, and 67% of private-sector workers have no disability insurance.¹ Here are some basic facts about this essential line of protection for you and your family.
Disability insurance has a lot in common with life insurance.
At first blush, it might be hard to distinguish between life insurance and disability insurance. But there are some key differences that are worth exploring.
Disability insurance activates when you can’t work Life insurance pays out in the case of your passing. Disability insurance can provide a stable income replacement if an injury, accident, illness, or something else renders you unable to work.
There are two types of disability insurance: long-term and short-term Short-term disability insurance can replace your income if you can’t work for a few months. Long-term disability insurance can protect you if a serious health issue takes you out of the field for more than 6 months.
Employers sometimes offer disability insurance (but it might not be enough)
It’s not uncommon for employers to provide their workers with some form of disability insurance. As of 2018, 42% of private sector employees had access to short-term disability insurance via their work, while 34% had long-term disability insurance options.²
However, it’s worth noting that this might not be enough to fully protect you and your family. Disabilities can increase your expenses, so you’ll need a strategy that replaces your current income and then some. Make sure your employer-provided plan will give you enough to cover all of your needs in the case of a disability and help your family for the long haul. If it doesn’t do either of those, you may need to turn to private coverage.
The government offers disability benefits (but they might not be enough, either)
Social Security does provide disability coverage to individuals who have worked long enough and paid enough into the system. However, applying for it is a time consuming process and average monthly payments were just over $1,000 as of 2017.⁴ Do your research to see if you’re eligible and if you’ll receive enough before you apply.
Above all, meet with a licensed and qualified financial professional to weigh your options and start developing a plan. They’ll assist you as you evaluate your need for protection, what employer-provided options you might have, and how disability insurance fits into your overall financial strategy.
¹ “Fact Sheet: Social Security,” Social Security Administration, https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
² “Employee access to disability insurance plans,” Bureau of Labor Statistics, U.S. Department of Labor, https://www.bls.gov/opub/ted/2018/employee-access-to-disability-insurance-plans.htm
³ “Disability Benefits,” Social Security Administration, https://www.ssa.gov/benefits/disability/
⁴ “Disability Insurance: Why You Need It and How to Get It,” Barbara Marquand, Nerwallet, Oct. 20, 2017, https://www.nerdwallet.com/blog/insurance/disability-insurance-explained/
It’s true that sometimes you’ve got to spend money to make money.
But there are plenty of things that people spend money on that give them absolutely no return. Some of these are obvious (lottery tickets and ponzi schemes), but others are subtle parts of our lifestyle. Here are three money black holes that you should avoid at all costs!
New Cars
Nothing feels better than driving off the lot with a new set of wheels. Until, that is, you realize that your car’s value has already started plummeting.
The most important rule to remember is that cars are practical tools, not long-term investments. Blowing a huge stack of cash might feel cool, but it’s a huge misallocation of money if you don’t have any to spend. Try to find a used model of the same car that’s five years old or more. Chances are you’ll get many of the same features for a fraction of the cost.
Pricey Phones
It seems like phones are improving every day and in every way. But is your high-end, name brand personal assistant really worth the steep price tag? Phones always decline in value after you buy them—around -14.80% for iPhones and -32.18%.¹ Unless your mobile device is a tool of your trade (i.e., you’re a TikTok influencer), dodge the hype and choose a cheaper or refurbished alternative.
Designer Clothes
New threads are awesome. You’ll never feel more like a hero than when you first hit the town in a freshly fitted suit or a designer t-shirt.
They’re also insanely expensive. Sure, they might not cost $1,690 like a Tom Ford long sleeve solid T-Shirt. But regularly buying top-of-the-line clothes can burn huge holes in your wallet.
Fortunately, you have some fun alternatives at your fingertips. Off-price retailers might sometimes carry your favorite brands at a fraction of the cost. And thrift stores can be goldmines of high quality finds if you’re adventurous enough to explore them with a friend!
Remember, it’s okay to spend money on cool gadgets and gear if you’ve saved up for them or you’re already financially independent. But if you’re just setting out on your journey, it’s best to practice some discipline and seek out cheaper alternatives to these potentially dangerous money black holes.
¹ “2021-2022’s Phone Depreciation Report: Operating System, Manufacturer, & Device Price Trends,” BankMyCell, https://www.bankmycell.com/blog/cell-phone-depreciation-report-2021-2022/
On paper, paying off debt seems simple. But that doesn’t mean it’s always easy.
In fact, it can get downright discouraging if you don’t see any progress on your balances, especially if you feel like your finances are already stretched.
Fortunately, there are ways to take your debt escape plan to the next level. Here are a few insightful tips for anyone who feels like their wheels are spinning.
You must create a plan
Planning is one of the most important steps towards eliminating debt. Studies show that creating detailed plans increases our follow-through.¹ It also frees up our mental resources to focus on other pressing issues.²
Those are essential components of overcoming debt. A plan helps you stick to your guns when you’re tempted to make an impulse buy on your credit card or consider taking that last-minute weekend trip. And tackling problems that have nothing to do with debt can be a breath of fresh air for your mental health.
You have to stop borrowing
Seems obvious, right? But it might be easier said than done. Credit cards can seem like a convenient way to cover emergency expenses if you’re strapped for cash. Plus, spending money can feel therapeutic. Kicking the habit of borrowing to buy can be hard!
That’s why it’s so important to fortify your financial house with an emergency fund before you start eliminating debt. Save up enough money to cover 3 months of expenses. Then quit borrowing cold turkey. You should always have enough cash in reserve to cover car repairs and doctor visits without using your credit card.
Your lifestyle has to change
But, as mentioned before, debt can embed itself into lifestyles. You can’t get rid of debt without cutting back on spending, and you can’t cut back on spending without transforming your lifestyle.
When you’re making your escape plan, identify your highest spending categories. How important are they to your quality of life? Some of them might be essential. But you may realize that others exist just out of habit. Be willing to sacrifice some of your favorite activities, at least until you’re debt free.
You can still do the things you want
This does NOT mean that you have to be miserable. You can still enjoy a vacation, buy an awesome gadget, or treat your partner to a romantic dinner. You just have to prepare for those events differently.
Create a “fun fund” that you contribute money to every month. Budget a specific amount to put in it and dedicate it to a specific item. This allows you to have some fun every now and then without derailing your journey to financial freedom.
Debt doesn’t have to be overwhelming. These insights can help you stay the course as you eliminate debt from your financial house and start pursuing your dreams. Let me know if you’re interested in learning more about debt-destroying strategies!
¹ “Making the Best Laid Plans Better: How Plan-Making Prompts Increase Follow-Through,” Todd Rogers, Katherine L. Milkman, Leslie K. John and Michael I. Norton, Behavioral Science and Policy, 2016, https://scholar.harvard.edu/files/todd_rogers/files/making_0.pdf
² “The Power of a Plan,” Timothy A Pychyl Ph.D., Psychology Today, Nov 17, 2011, https://www.psychologytoday.com/us/blog/dont-delay/201111/the-power-plan
The best way to determine your retirement target savings is to use your income.
Here’s why.
Almost nobody wants to work 40 hours a week in retirement. Not you, not me. To avoid that, you must have money at your disposal to cover expenses like food, travel, and medical bills.
But how much do you need?
There’s a 38% chance that if you retire at 65 you will live to 85, and a 5% chance that you’ll make it to 95.¹ That means you’ll need enough cash to cover at least 20 years of life with no income.
This is where your paycheck comes into play.
Aiming to save 20 to 30 times your income helps prepare you to maintain your current lifestyle into retirement. You might even have extra spending money if you’re debt free!
Plus, it forces you to scale your savings as your income grows.
Setting a goal based solely on how much you want to spend in retirement can result in lowering your savings goal. You might splurge more now, telling yourself that you’ll just live on less later. But you’re cheating your future self!
Using your income as a retirement benchmark forces you to increase your savings amount as your paycheck grows. Let’s say you make $80,000 annually and you start saving. Your goal is to stash away 20 times your income, or about $1.6 million.
After a while, you’re able to save 5 years worth of earnings, or about $400,000.
But then you get a raise! Suddenly you’re making $100,000 per year. Your retirement target shifts up accordingly to $2 million. That $400,000 you have in the bank is a hefty slice of cash, but it’s now only worth 4 years of income instead of 5.
In other words, basing your saving around your income actually encourages you to save more as your income increases.
The best thing about this method is that it focuses on the most important part of retiring—to sustain the lifestyle that you envision. Meet with a licensed financial professional to map out what that would look like for you and how much you must save to make that vision a reality.
¹ “How Long Will Your Retirement Really Last?,” Simon Moore, Forbes, Apr 24, 2018, https://www.forbes.com/sites/simonmoore/2018/04/24/how-long-will-your-retirement-last/?sh=31a59fb37472
50% of Americans have less than $500 saved.¹
That means most Americans couldn’t cover unplanned car repairs, home maintenance, or medical bills without selling something or going into debt. They’re constantly living on the edge of financial ruin.
That’s where your emergency fund comes in. It’s a stash of cash that you can easily access in a pinch. You’ll be able to pay for that blown transmission without visiting a payday lender or selling your grandma’s silverware!
But here’s the catch: Your emergency savings account won’t help you much if it’s under-funded.
Follow these two rules to ensure that your rainy day savings can withstand the storms of life.
Rule #1: Only use your emergency fund for real emergencies.
I get it. Your emergency fund is an easily accessible chunk of money. Of course it’s going to be tempting to tap into it when you’re buying a new car or planning a dream vacation.
But your rainy day savings shouldn’t fund your lifestyle. They should protect it.
Think of it like this. Your vacation fund pays for your annual beach trip. Your emergency fund covers the bill when your car breaks down on the drive home. Only touch your emergency fund for unexpected expenses and enjoy the peace that comes from being prepared.
Rule #2: Always refill your emergency fund when it’s low
Ideally, your emergency fund should be stocked with 3 to 6 months of your income at all times. That should be enough to cover the gambit from small unexpected costs to a month or two of unemployment.
Don’t be afraid to tap into your emergency savings when you face unforeseen financial hiccups. Just remember to refresh your fund when the emergency has passed. The last thing you need is to be caught in the crosshairs of another crisis without a buffer.
Don’t let a financial storm blow you off course. Prepare for your future, and start building an emergency fund now. If you follow these rules, it can help financially protect you from the challenges life will inevitably send your way.
¹ Maurie Backman, “50% of Americans Have Under $500 in Emergency Savings. Here’s How to Build a Safety Net ASAP” The Ascent, Dec. 2, 2022, https://www.fool.com/the-ascent/personal-finance/articles/50-of-americans-have-under-500-in-emergency-savings-heres-how-to-build-a-safety-net-asap/