Uncommon Cents

As someone who works in health care, I realize lots of the system is broken. For instance, people who have great jobs with great pay often also have great medical insurance where they have copays close to zero. On the other hand, people with low paying fast food jobs often have medical insurance that’s the bare minimum with large copays, meaning that the people who can afford large copays have none, and the people who can least afford copays have horribly expensive ones.

See what I mean?

Yet, I don’t really think it’s possible to get everyone who is required to buy medical insurance to do so. Why?

Look at the auto insurance situation in Hawai’i. It’s required that every car be insured–yet estimates are that about about 30% of Hawai’i’s drivers are uninsured.

The penalty for being caught driving without insurance is second only to driving under the influence as far as moving violations go. Yet, one out of three Hawai’i drivers have no insurance.

Professionally, I hope that health care improves with these measures; personally, if I was a gambling man, I would put down a rather large amount of money that I will continue to encounter hospitalized patients without insurance on a very regular basis.

Medical costs in the United States continue to go through the roof. Through talk of health care reform and controversy with Medicare and Medicaid recipients–and the tons of confusion accompanying those programs–health care costs have been rising typically beyond the rate of inflation.

Employers who are often required to provide health insurance for their employees are looking for relief from relentless price increases. Increased copays for the insured is often what happens–even myself, who works for a health maintenance organization, is far from immune. For the first time this year I’m paying for my health insurance–up until now the organization I worked for paid for the insurance in its entirety.

This all puts a dent on our personal finances. Not just paying the premium, but paying the copays for medications, tests, labs, and glasses is amounting to over $1,000 a year. Fortunately, this year my employer also started offering a flexible spending plan to give tax relief–essentially a discount of about 30%–for these out of pocket expenses.

It’s still more than I’ve ever spent before.

And this with a very decent medical plan. The underinsured or out and out uninsured are in much worse shape.

It’s going to be interesting to see how this unfolds.

Price increases don’t thrill me, but honestly, GEICO has been great to me in the time I’ve had them. They’ve paid claims quickly and with no headaches and they’ve reduced my rate at least once, considerably.

I got my new policy and the price has gone up.

But less than two bucks over a six month period.

That’s the kind of increase I’m fine with paying. Insurance is a necessity, and I want great service when I need it, as well as a great price. It’s why I stick with them.

This is a guest post from the National Endowment for Financial Education (NEFE), a non-profit dedicated to improving the financial literacy of all Americans. NEFE operates the site Smart About Money and have developed a series of articles filled with tips to help you make 2010 the year of financial freedom. You can also find Economic Survival Tips, worksheets and articles focused on financial education related to housing, spending, credit and job change. Please look at Smart About Money’s other articles to help to make 2010 a great financial year for yourself, and you can follow NEFE on Twitter at @nefe_org

1.      Control spending: If you spend less you’ll have more money available to pay down debt and save for the future. Write down your expenses for a month to see where your money is going. You might be surprised by how easy it is to find places to scale back.

2.      Create a debt repayment plan: If you carry credit card debt, write down everything you owe and make a plan to pay it off. Start with small items you can act on right away–it will make tackling the bigger debt easier. Also, try buying with cash only. It’s a sure-fire way to prevent increases in your credit card debt.

3.      Set up auto-savings plans: Arrange with your bank or another financial institution to have a set amount deducted from your checking account to a savings account each pay period. Of the Americans who have been able to contribute to emergency savings funds, automatic withdrawal is the most popular method, according to the Consumer Federation of America.

4.      Boost retirement savings: If your employer offers a 401(k) plan, increase your contributions. If you don’t have an employer plan, open an Individual Retirement Account (IRA) and arrange for contributions to be made automatically from your checking or savings account.

5.      Create a long-term plan: Write a list of your long-term goals, such as buying a home or saving for college or retirement. Visit the Life Events section of Smart About Money for concrete tips on accomplishing those goals.

6.      Protect Yourself: Be prepared for the unexpected by making sure you, your family, your assets and investments are insured and fully covered. If you do not have a will, make 2010 the year you establish a life plan.

7.      Find a financial buddy: Share your financial resolutions with a friend, colleague, or family member, and you’ll be more likely to keep them. Find someone else who wants to turn around their debt or cut their spending, and establish a mutual support system.

For material goods, my answer is largely yes, although there are certainly exceptions. For instance, one of the things I own is a gasoline powered generator, which has been used three or four times in a couple of years–because it’s for emergencies; that’s an exception.

On the other hand, a few years ago after a truck break in, I bought a new lock for the door with the damaged lock. It never was installed, and with my more recent break in, the lock has been replaced. That was clearly just a waste of money.

Then again, there are other things that don’t get used but aren’t waste–although making some use of them when possible is wise. For instance, medical insurance–if not used, it can be a waste, but you really want it just in case. And, in most situations, you can make at least some use of it. Auto insurance is in many ways a necessity–often required if you drive–but it feels like a money sink if you never use it, until a cop pulls you over, anyway!

In any case, one of the ways to try to eliminate waste and clutter is to make use of the stuff you pay money for, however you’re able to!

One of the changes with benefits at my full time job right now is the implementation of a kind of health savings account which they are calling a “Health Care Spending Account.” A health savings account lets a worker put away pre tax dollars to pay for some health expenses–effectively allowing the worker to not pay taxes on those items.

In my case, this effectively lets me keep 30% more of my money.

Health savings accounts require a decent amount of planning. Contributions are withheld from each paycheck. At least in our situation, if not all of the dollars put into the health savings account are not used by the end of the calendar year, they are lost–so planning is important.

I really need to do the math to make sure all of this works out without any loss of money, but I’m quite sure I’ll make use of this in 2010.

When I reviewed the All Your Worth audiobook, I was first skeptical of but then intrigued by the idea of their simple budget: 50% to essentials, 20% to savings, and 30% to everything else.

Essentials include things like rent or mortgage, insurance, debts, and other contractual obligations.

As I’ve mentioned in a few posts recently, insurance has been an issue. Fortunately, GEICO lowered my yearly auto insurance costs; unfortunately, the cost of my mother’s health insurance may be going to go up tremendously.

I was also able to reduce the cost of the mortgage with a refinance to a great 4.25% interest rate (fixed for 30 years) a few months back. But with this spike in mom’s insurance premium, I need to find a way to get some other fixed costs down.

One of the issues with studying personal finance for awhile is there comes a time when you believe you’ve cut everywhere you can. I’ve reached that point. I’ll be looking at this more closely on the blog in the next few weeks.

Cash flow is likely to be more of a problem for me in 2010 than it was in 2009. My health insurance costs–well, that for my mother, who is my dependent–are going up considerably, possibly as much as $300 a month from what I can estimate right now.

This is going to take quite some doing to make ends meet. $300 is not a drop in the bucket–rather, it’s several percentage points of my monthly gross income. That’s money I have to offset somehow, which brings us back to something basic.

There’s really only two things I can do to improve my financial situation:

1) Increase my income

or

2) Decrease my expenses

Conceivably, I could also do both. Since it’s really unlikely I’ll be changing my full time job and almost as unlikely I’ll be changing my part time job, my options are limited as far as increasing income goes. I could get another job–or hope my blogging takes off!–but a third job is time intensive.

Decreasing expenses is usually the best choice but right now I’ve reached a point where I’ve got very little left to reduce without massive changes in my lifestyle.

Perhaps I’ve reached that point. But really, there’s only two things I can do: make more money or spend less money, and that’s very clear.

Despite the good times in the stock market this year, the economy itself still appears on the ropes. We’ve discussed how 401(k) matching is one of the steps that companies have taken to spend less; they’ve also cut or eliminated dividends, some despite being nicely profitable before the dividend cut.

Now we have companies cutting their benefits–including the company I work for cutting mine–in an effort to stay in the black.

I’m sure that the companies that are cutting back on these benefits are not thrilled with doing so–after all, they want to treat their people well, correct?–but feel like they have to do so to stay alive financially.

For someone like me, who has worked for the same company for nearly 15 years, I’m wondering if these are desperate times for employers. Never before have my benefits been so poor, and it’s clearly to save money. Desperate times would of course result in desperate measures.

Let’s home the economy improves–a lot, and soon.

It’s clear that one of the issues we’re all facing is the cost of health care and medical insurance (full disclosure: I work in health care). This week the open enrollment packet for my 2010 benefits showed up and it wasn’t pretty.

For the first time since I’ve worked at this job, we’ll have to pay for our dependents to be covered, and since my dependent is my mother, I’ll have to pay post tax rather than pre-tax. That’ll definitely be a lot more than its been up to now (I basically paid the tax on about $160 a month; now I’ll be paying the $160–or so–a month).

The more upsetting thing to me is that at this moment–open enrollment does not start until the 18th–is that nowhere in this packet does it include the costs I can expect to be paying. The $160 figure above is something I made up based on 2009 costs.

I’m going to have to spend more time looking at this once the figures actually come out.