Pick the Right Credit Card

Financial Freedom in 2021! Take Action: Day 24

Many personal finance gurus recommend not having any credit cards at all, but I subscribe to the newer recommendations… get the right card and make the most of those rewards!

Disclaimer: The credit card suggestions linked below will ONLY be beneficial if you are in a financial position to pay off your balance each month on time.

When it comes to choosing the right credit card for you, it’s best to decide what you’d want to use card rewards for. Travel (airfare, hotels)? Cash back? Restaurant gift cards?

Once that’s been identified, check out these websites for a full comparison of the best cards out there this year.

  • The Points Guy will break down the best cards per category, based on what benefits you’re hoping to get from your card.
  • Nerd Wallet shares their top 8 choices for 2021.

If you’re ready to take the card rewards game to the next level, you can try travel hacking. Many travel/credit card hackers claim to have traveled the world for free. Early last year, we earned tens of thousands of bonus miles through the Capital One Venture card by enrolling when there were multiple offers overlapping. The points we quickly collected covered airfare and part of our hotel stay for a family trip to Disney Land and Universal Studios (before the pandemic hit)!

Today’s action step is to audit your wallet. Get out all of your credit cards and determine whether they’re carrying their weight by providing you the rewards you’re seeking. Put the ones you rarely use or that don’t fit the bill in a drawer. It’s ok to keep the account open if you’ve had the card for a long time because that can help with maintaining a high credit score; just don’t use it anymore.

Also, if any of your current cards carry a balance or if you have a card with an annual fee, call the number on the back and prepare to negotiate. Ask if you can get your interest rate lowered or your annual fee waived. (You may have to request to be sent to the retention department.) Many companies will offer some sort of discount or assistance if you just ask.

If you have kids, there’s one more action step today. Read about whether you should add your children to your credit card to build their credit scores?

Cover Your Ass-ets: Choose the Right Insurance Coverage

Financial Freedom in 2021! Take Action: Day 22

Let’s talk insurance. No one wants to pay for it, but no one wants to live without it either. All the hard work we’ve put into planning ahead for the betterment of our family could be completely wiped out with one disaster, diagnosis, disability, or death. This is why having an emergency fund as well as the right amount and right types of insurance are so important.

Life Insurance

Choosing the right type and amount of life insurance can be very tricky. Those who sell it have gotten creative in marketing the different types, not only as insurance but also as an investment. I prefer to look at insurance for what it actually is: protection of my assets. It is separate from my investments.

When doing an assessment of life insurance, a good question to ask is, “If I die, will a loved one need my income replaced to be able to survive or will a loved one need to pay another to take on my familial duties?” If you are a working parent or spouse, and your family depends on your income, life insurance is a must. If you are a stay at home parent, and your family depends on the work that you do at home, then life insurance is also a must. (The working parent would need to pay a caregiver to take on your responsibilities.)

I’ve heard that a good rule of thumb for deciding on the amount of life insurance to buy is to double your annual expenses, and then add a -0-. So, if you’re able to live on $50,000/year, double that and add a -0-. That would equate to a $1,000,000 policy.

Life insurance plans offered by employers may not provide enough coverage for your family. It is likely that a supplemental plan will be required to reach the benefit amounts mentioned above.

There are also many other considerations regarding which type of life insurance is the best choice. When in doubt, many personal finance experts recommend sticking with term insurance. Keep in mind that you only need to carry life insurance until you no longer have people dependent on your income and/or until you’ve reached a level of wealth allowing you to self-insure.

With all this being said, we know that any dollar amount will not take away the extreme emotional loss of a family member. Life insurance can also allow for some peace of mind and money for grief support during such a devastating time for a family.

Health Insurance

It’s outrageous, I know! We spend $15,800 per year on premiums to cover our family… and that’s on a high deductible group healthcare plan. If we had chosen the lower deductible plan, we’d be out an additional $2,000. We’re covered through my husband’s employer, but what we pay on premiums each month is nearly what I net from my part time job. But because our family’s health is an incredible asset, we pay to protect it.

I’d prefer to pay a lot less to protect this asset, but we haven’t found a way to qualify for less costly options. If anyone has any advice in this area, I’m all ears!

However, if you meet certain income qualifications, there are great options on the health insurance marketplace (healthcare.gov). Unfortunately, open enrollment has closed for the year, but if you have experienced a life-changing event, such as marriage, having a baby, or losing your job, you can still purchase a plan, hopefully with significant discounts.I am probably not the best person to be offering advice in this area because we spend an arm and a leg on this type of insurance, but I do believe that keeping an up-to-date health profile on your family can help you determine which plan is the best choice for you. If you rarely go to the doctor and each family member has good health overall, you can opt for the higher deductible plan and save a few thousand dollars per year. My husband and I have to reassess each year which plan might be best due to the health issues our family is currently facing. A couple years ago, we calculated that we spent well over $23,000 on premiums and medical care due to a baby with asthma and a new Crohn’s diagnosis for our eldest child. Thankfully, we have been able to get both conditions under control, so we are able to go back to the less expensive, higher deductible plan. So, be sure to review the options offered by your employer each year rather than just renewing what you’ve always had.

One more tip – be sure to look into whether you’re eligible for an HSA. This is one of the best ways that you can get a little bit further ahead in investing for retirement.

Disability Insurance

As mentioned in the post, Take Action: Day 1, your ability to earn an income is one of your greatest assets, and you buy insurance protects assets. Therefore, it would make sense to cover yourself in case of disability.

According to statistics, you have a 1 in 4 chance of becoming disabled during your working career. Employer benefits usually only pay 40-60% of salary, on which you still have to pay taxes and high insurance premiums. These policies are often short-term, meaning that you’d have to apply for government assistance after that term ends, and Social Security disability claims often take years to process and to be awarded. (Minimum time is 3 months for processing claim and then many end up in court.)

Many people choose to supplement their company disability coverage with another plan to cover at least half of their annual income (or the amount NOT covered by the company plan benefit).

Homeowner’s/Renter’s Insurance

Here we are with another asset that needs protection: your home and/or rental property. Thankfully, you can really shop around to find discounts and opt for higher deductible plans to lower your premiums. I’d recommend using a broker who can shop around for you.

Car Insurance

Again, you can find a broker to shop around for you and get you the maximum discounts. Consider a higher deductible, less comprehensive coverage for older vehicles, and reduced rates for safe driver record, career/company affiliations, and bundled insurance packages.

Umbrella Insurance

This is pretty much insurance for your insurance. Yep, that’s a thing. Also called Liability Insurance, it’s a relatively affordable way to protect you from the “extras” that your insurance policy may not cover, including lawsuits for additional damages.

This list of types of insurance includes all of the ones highly recommended. There are many other types not mentioned here that may protect some of your personal or professional assets.

However, some insurance options I tend to steer clear of are:

  • Rental Car Coverage: My own car insurance and travel credit cards have sufficient coverage.
  • Mortgage Life Insurance: This is life insurance for the purposes of paying off your mortgage if you die. Instead of paying for a rider or additional policy, just make sure you have adequate life insurance coverage as mentioned above.
  • Identity Theft Insurance: Keep tabs on your accounts and set security alerts for each of your cards and accounts to protect yourself without buying an insurance policy.
  • Credit Card Payment Protection: Your disability or life insurance policies should help to cover credit card payments in case of an emergency. Also, don’t forget that emergency fund you’ve had saved up.
  • Long-Term Care: This one is a toughie! I’m currently of the mindset that my husband and I will be able to self-insure for future long-term care (think assisted living or nursing home), but I have been debating buying a policy for my father. Long-term care insurance is often recommended for people who have too much money to qualify for Medicaid (which is only used toward nursing home care) yet not enough money to pay all expenses out of pocket. And the expenses are HIGH! I’m honestly still on the fence about what to do, but for now, we’re considering other investment options to accumulate cash toward long-term care if/when it becomes necessary.
  • Travel Insurance: With the current liberal cancellation policies for airfare and hotel stays, it’s not necessary. When cancellation policies are a bit stricter, I take each trip case by case. More expensive travel or further-away destinations sometimes warrant a travel insurance policy, especially when kids are involved. The risk of illness goes up when traveling with a large family.

Today’s action step is to review your insurance plans and policies. Consider whether you really need each policy you have or if you need to add more. Determine whether you have adequate coverage based on your family’s financial situation. Then, shop around for the best rates

Consider Real Estate Investing

Financial Freedom in 2021! Take Action: Day 21

Don’t wait to buy real estate, buy real estate and wait.

– T. Harv Eker

My husband and I just started our real estate investing journey by closing on our first rental property last year. We decided that because we were starting late in life on maxing out our retirement accounts, we needed to add real estate investing to help us reach FI a little faster. I read, researched, and studied several free resources, such as the Bigger Pockets Podcast and books from the library, for almost a year before we purchased our first (non-primary) residence.

It was not a quick process, and finding our second deal in today’s competitive market is proving to take longer than we had planned as well. We’re determined to add two more properties to our portfolio this year, but we’d rather pass on several good deals than buy one bad one. So, we’ll continue to follow Gary Keller’s advice in The Millionaire Real Estate Investor: “Persistent Effort, Patient Money”.

Although we’ve decided to slowly start with buying rental properties, there are many additional options and opportunities in real estate investing. It can be as easy as selecting a fund through your online broker or putting a couple hundred dollars into a pre-vetted deal on a crowdsourcing website like Fundrise.

Today’s action step is to read about these 5 ways to get started in real estate investing. Determine whether any of these are worth adding to your overall investment portfolio and retirement plan. If so, make a list of resources to dig a little deeper into your preferred method. I highly recommend the book and podcast linked above.

Invest for Retirement

Financial Freedom in 2021! Take Action: Day 20

It’s hard to picture yourself getting old. It can be difficult to imagine a day when you won’t be capable of or motivated to work in some capacity. However, it’s not that hard to picture yourself spending every day exactly as you choose without the pressure of earning money to cover bills. Hold that thought!

Let’s talk about retirement planning. I am not a financial planner, nor an advisor, but I think about investing for retirement quite a bit. There is A LOT of information out there on how best to invest your money long-term. There’s no way I can cover the mountain of advice I’ve read and listened to in a short blog post. Instead, I’ll share the best tips I’ve heard from my favorite finance peeps.

Start as early as possible!

Let’s illustrate this with two extreme cases… Early Ellie and Late Larry. Both start working at 20 and both want to “retire” at 60. The market returns 7% a year, compounded monthly.

  • Early Ellie diligently invests $100 a month for ten years. She stops contributing when she turns 30 but leaves the money in the market for the next thirty years until she’s 60.
  • Late Larry waits ten years before he starts investing $100 a month into the stock market for the next thirty years until he is also 60.

Who ends up with more money… Ellie who has personally contributed $12,000 or Larry who has personally contributed $36,000?

  • Ellie – $141,303.76
  • Larry – $122,708.75
Source: Wallet Hacks

The early bird almost always catches the worm… first. But don’t take this to mean that if you’re starting late that you shouldn’t start at all. Today is still earlier than tomorrow!

Also, remember that more time in the market is better than timing the market. My husband and I were nervous about purchasing more shares of VTSAX during the week of the inauguration, not knowing what kind of response the stock market would have to the change in administrations. Well, I wish we had purchased last weekend as planned because the stock market had the biggest rise on Inauguration Day in 36 years! 🤦‍♀️

Identify the Right Investment Accounts

This article from Nerd Wallet summarizes the 4 types of accounts you need to know (brokerage accounts, retirement accounts, education accounts, and kids’ accounts).

Diversify your portfolio.

Many planners suggest using the bucket approach: hold some cash savings along with investments in stocks and bonds to balance out your funds. Many also add other investments, such as real estate, commercial ventures, and personal lending to diversify further.

Simplify Investing with Index Funds

If you’ve read JL Collins’ book, The Simple Path to Wealth, you know that his main piece of advice is to choose index funds and then leave them alone. Here’s an example of a simple portfolio that would be easy to execute and have you well diversified in stocks and bonds within your accounts mentioned above.

  • Total Stock Market Index
  • Total International Stock Index
  • Total Bond Market Index

The stock index funds allow you to invest in every stock within that index in proportion to the size of the company. You own a piece of all the companies. No need to pick just one or a few companies. If the whole stock market index goes up, so does your portfolio! It’s also recommended to balance out your domestic holdings with some international ones, just in case the US economy takes a nose dive. Many recommend that 15-30% of your stock holdings be in international markets.

Bonds typically carry less risk (and lower returns), but they balance out the more risky stock investing. Owning a bond index saves you from trying to decide which bonds are the best. Own them all instead.

(The portfolio above is only ONE example of thousands of options for a retirement investment portfolio. )

Beware of High Fees

Another reason why index funds have become so popular is because they come with very low fees, usually under .5%, which is significantly less than actively-managed mutual funds. This way, you can keep as much of your interest earned as possible.

Rebalance your Portfolio over Time

Rebalancing refers to adjusting your asset allocation based on your current risk tolerance and how close you are to retirement. For a young person who has many years before retiring, her portfolio will likely be heavy in stocks. For someone who is within a few years of retirement age, her portfolio will likely be heavier in bonds to minimize risk and preserve wealth.

Choose a Fee-Only Financial Advisor or Planner

Advisors working on commission are quickly becoming a thing of the past. According to Investopedia.com, “fee-only advisors have a fiduciary duty to their clients over any duty to a broker, dealer, or other institution. In other words, upon pain of legal liability, they must always put the client’s best interests first. In contrast, a commission-based advisor’s income is earned entirely on the products they sell or the accounts that are opened. Commission-based advisors can be fiduciaries, but they don’t have to be.”

When looking for advice on retirement planning and setting up the best investment portfolio for your specific situation, a fee-only advisor is likely your best choice.

No matter what you decide are your best options, just make sure you’re prioritizing a significant part of your savings to go toward investing in retirement. If the infinitude of information prevents you from getting started or scares you from making a necessary change to your portfolio, keep your strategy as simple as possible.

Today’s action step is to review all of your investment accounts.

  • Identify what percentage is going into your 401K and make sure it’s at least at the match your company offers (if they do) but preferably closer to the max allowed.
  • Pay attention to whether you’re maxing out your IRA’s, if you have any, and if not, can you? Decide if you’re eligible for a ROTH IRA. If so, might that be a better choice than a traditional one?
  • Review your asset allocations in each account and determine whether those represent your risk tolerance and age.
  • Assess the fees you’re currently paying to a financial advisor and/or through an actively managed mutual fund. If they’re high (>1%), consider passive investing through index funds.
  • Discuss what percentage of your income you want to invest moving forward, in stocks, bonds, and other potential opportunities.

There is a lot to consider, and it may be worth scheduling another money date to go over the many questions and options regarding retirement planning. I admit that this is likely not a one-day action step. Mark your calendar to dive in deeper and cover all the bullet points listed above.

Know Your FI Number

Financial Freedom in 2021! Take Action: Day 19

Whether you plan to retire early or work until the Lord takes you home, it’s helpful to know the magic number you’re aiming toward to no longer be dependent on a regular paycheck to pay your bills and live a full life. Your FI (Financial Independence) number is the amount of net worth you need to support you for the rest of your life moving forward.

The breakthrough Trinity Study published by three professors from Trinity University in 1998 determined a safe withdrawal rate* from stock portfolios despite the fluctuations of the market, and the conclusions they made have had a huge impact on retirement planning. Their research produced the “4% Rule” mentioned in yesterday’s post. What this means is that if you can estimate your annual expenses for when you plan to retire (or when you’re hoping to reach that state of financial freedom), you can multiply that yearly amount by 25. This is a simple way to calculate your FI number.

Here’s an analysis of how I’ve calculated my family’s FI number:

  • Anticipated Retire Early Date: January 1, 2030
  • Family Status (at that time): 2 children graduated from high school, 2 still in grade school
  • Potential Side Income: Real estate investing (monthly cash flow)
  • Estimated Annual Expenses: $70,000
  • Expenses Remaining after Side Income: $70,000 – (10 homes * $3600 cash flow) = $34,000
  • Required Net Worth: $34,000 * 25 = $850,000
  • FI Number (with RE investing): $850,000 … almost there!
  • FI Number (without RE investing): $1.75 million … NOT almost there!

There are so many variables, right? But that’s ok. The analysis is the the fun part. It’s a game to see how low you can get your expenses by paying off debts and cutting unnecessary spending. There are also so many ways to earn a passive income to offset your anticipated annual expenses and decrease your FI number; real estate is just one of them. What’s important is that you continue to keep track of your expenses and net worth with intentionality. If you do that, chances are that you’ll reach FI much sooner than planned.

In the example above, I conservatively estimated owning 10 doors in our real estate portfolio at $300/month cash flow, but our goal is to own 20, and maybe our average cash flow will be even higher than that. If so, we may be able to cover ALL of our anticipated expenses through those investments. We may also downsize our home with fewer children living with us or we may decide to do traveling homeschool, which will decrease our living expenses, and therefore, our overall annual expenses.

The point is that things will change; the future is unknown. The good news is that you now have a framework and an easy way to calculate your FI number even as income, expenses, and investments change.

Another aspect to consider is that many believe that the safe withdrawal rate is now higher than 4% and closer to 7%. This would significantly reduce how much you’d need in your nest egg. At a safe withdrawal rate of 7%, our FI Number (without real estate investing) drops to $994,000!

Today’s action step is to calculate your FI number. It’s ok if you have a few different scenarios with a few different outcomes. Just doing the calculation will give you a ballpark to aim for and get you in the habit of doing the math as things change. There are FIRE calculators online that you can use to find your FI number while taking into consideration your side hustles, higher or lower withdrawal and return rates, as well as anticipated expenses. So… what’s your number?

*The safe withdrawal rate (SWR) method calculates how much a retiree can draw annually from their accumulated assets without running out of money prior to death.

Financial Literacy: Talk the Talk

Financial Freedom in 2021! Stay on Track: Day 18

There are a lot of vocabulary and buzz words associated with personal finance, and the lingo can sometimes shy people away from engaging in money conversations or asking important questions about their investments and debts.

The next few days will be focused on investing strategies. Here is a *short* list of basic key words related to investing so you can be ITK:

  • 401K – A qualified plan established by employers to which eligible employees may make a salary deferral. Always invest up to at least the company match percentage. It’s free money!
  • 529 – Tax-advantaged savings vehicle designed to save for the future costs of higher education. It can be used for the education of any family member, even yourself.
  • Annual Percentage Yield (APY) – The real rate of return earned on an investment, taking into account the effect of compounding interest.
  • Bond – A debt instrument where the issuer (borrower) promises to pay back the lender (bond purchaser) at a specific rate over a certain amount of time.
  • Capital Gain (Loss) – The amount of money made (lost) between the purchase and sale of some investment.
  • Certificate of Deposit (CD) – A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate, and can be issued in any denomination.
  • Diversification – A risk management technique that mixes a wide variety of investments within a portfolio.
  • Dividend – Sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).
  • Inflation – A rise in the general or average price level of all the goods and services produced in an economy. (Average is 3% annually.) This is why not investing is riskier than investing, according to many experts.
  • Investment or Brokerage Firms – A business whose main responsibility is to be an intermediary that puts buyers and sellers together in order to facilitate a transaction. Brokerage companies are compensated via commission.
  • Index Fund – A mutual fund with a compilation of assets constructed to match the performance of a specific market index, such as the S&P 500.
  • IRA (Traditional) – An account in which an individual may set aside earned income in a tax-deferred savings plan for his or her retirement.
  • Mutual Fund – An investment fund that pools together investors’ money to purchase a diverse portfolio of holdings. These funds are actively managed.
  • Opportunity Costs – Real or potential costs associated with missed opportunities based on choices made.
  • Roth IRA – An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible and qualified distributions are tax free.
  • Rule of 72 – A method used in finance to quickly estimate the doubling or halving time through compound interest or inflation, respectively. For example, using the rule of 72, an investor who invests $1,000 at an interest rate of 4% per year, will double their money in approximately 18 years.

Many of the definitions above came from https://financeintheclassroom.org/student/vocabulary.shtml. Another fabulous resource that goes more in depth is this glossary of terms.

In addition to the terms above, the following buzz phrases might come up during your personal finance journey:

  • 4% Rule – States that you can withdraw 4% of your portfolio each year in retirement and not run out of money. It was created using historical data on stock and bond returns over a 50-year period.
  • Financial Freedom – Control over finances instead of them having control over you.
  • FIRE Movement – Acronym standing for Financial Independence Retire Early. Committed participants strive for a >50% savings rate, diverse investment portfolios, and retiring much earlier than expected, often in their 30s.
  • Savings Rate – Measurement of the amount of money, expressed as a percentage, that someone deducts from their income to set aside as a nest egg or for retirement. Calculate yours here.

Today’s action step is to look up any additional terms related to finance or investing that you’ve heard but never fully understood. Also, calculate your savings rate and then answer the question, “What would financial freedom mean to me and my family?”

Pay Off Debts

Financial Freedom in 2021! Take Action: Day 17

You now have several tactics lined up for saving on monthly and annual expenses, as well as a few ideas for making extra cash. Now, each dollar needs a job so that it doesn’t end up in the wrong place. If you have debt, several of those dollars may need to take on the job of paying that down.

Where do you start? First, know what you owe. When you were calculating your net worth on Take Action: Day 1, you had to enter Liabilities into the calculator. Those are debts, and some could be considered “good” debt while others are considered “bad ” debt.

Good Debt allows you to make an income or grow your net worth through a low-interest investment, such as a mortgage on your home or your student loans. You still want to aim to pay them off at some point, but you’re hopefully receiving greater value than the interest you’re paying on it.

Bad Debt is high-interest consumer debt, such as credit cards or personal loans. These debts and the interest you pay on them will significantly delay you on your path to financial independence. You want to pay off bad debts first.

There are also different methods to paying off that bad debt. You probably hear a lot about debt snowball vs. debt avalanche.

Debt snowball: You focus on paying off your smallest debt first (while paying minimums on the others), then roll the amount you had been paying on it into payments on the next largest.

Debt avalanche: You pay off your debt with the highest interest rate first (while paying minimums on the others), then the next highest rate, and so on. It may save you time and money over the course of your debt payoff.

Source: Nerd Wallet: Pay Off Your Debt

Debt Snowball vs Debt Avalanche

If you’re carrying any bad debt, pick a plan above to pay that off first. Then, go after the car debt and student loan debt. Once you get a little momentum, that debt will be paid off before you know it, and your money will be available for saving toward priorities and investing in the future. Plus, you’ll feel so free!

If, upon reading this post, you have zero debt (other than a mortgage), congratulations! Today’s action step is to make a plan not to incur any debt this year. If a big purchase is coming up, have a strategy for paying for it in cash. You can try a short term savings method for a big purchase rather than resorting to using credit.

Here’s how… Calculate what the item or trip costs with all additional taxes and fees. Then, determine how many months you have until that specific purchase. Say you want to set aside $250/month to purchase a new dining room table at $1750 in 7 months. What are you able to give up completely for just 7 months? Maybe you can do at-home haircuts for a savings of $80/month. Maybe you can give up cable or TV streaming for a savings of $60/month. Maybe you can boycott shoes- and clothes-shopping for that time period for a savings of $60/month and choose an at-home meal instead of one night of dining out with the family for a $50 savings. Another option is to put the money you save from challenges like spend-nothing weeks or a free-activity month toward that total.

Then, after you make the purchase you saved for, you can decide whether you want to re-up your TV streaming service, go back to salon haircuts, and replace a few pairs of shoes … or you might not. You may have found even more areas to cut your spending long-term.

Cut Healthcare Costs

Financial Freedom in 2021! Take Action: Day 15

What a whale of a topic, right? Everyone from you to your parents to the members of Congress is trying to figure out how to cut costs on healthcare. On the political side of things, the debate will likely go on and on throughout our lifetime and beyond. On the personal side, thankfully there are a few strategies we can employ to reduce how much we spend on our own care.

Keep in mind that healthcare and health insurance are two different things. Today’s focus is on the cost of healthcare, but there are a few services you can take advantage of by carrying health insurance.

  • Nurse Line – Check to see if your insurance provider offers one; most of the big names do. Blue Cross Blue Shield has a nurse line 24/7/365 to answer questions about wellness, prescription drugs, self-care/at-home treatments, allergies, and even your specific symptoms. And this service is free. So, if you’re not sure whether you should see a doctor or if you might be having an allergic reaction or whether you’re taking the right medication for your symptoms or if there’s a vitamin or supplement that might help with a genetic predisposition to a chronic disease or if you’re unsure as to how two medications might interact or if you’re curious about a weird pregnancy symptom, etc, etc, try the FREE nurse line first and possibly save yourself a trip to the doctor as well as the co-pay.
  • Virtual Visits – If the nurse line doesn’t answer all your questions, try a virtual visit with one of the doctors with the insurance company. Major providers are now offering virtual appointments with doctors working for them. Your co-pay may even get reimbursed by your insurance provider if you use their own virtual medical platform. (Call to check your plan’s benefits.)
  • Benefits Summary – Know before you go. Call your medical or dental provider before going in for a visit or procedure and ask for the specific codes that will be billed. Then, call your insurance company’s benefits line before going to your appointment to ask for the fees allowed in your specific area for each code and how much is covered by your plan. Don’t assume that the doctor’s or dentist’s office quote is exactly right. Also, keep in mind that if you’re seeing someone out of network, that doctor/dentist does not have to charge the contracted rate for your area, and you’d have to pay the difference between what that doc charges and what your insurance company has set as a maximum.

In addition to making the most of your insurance benefits, keep these tips in mind for future medical expenses:

  • Over the Counter vs Rx – The assumption is often that over the counter drugs are cheaper than prescription and that generic is cheaper than name brand. But these are not always true assumptions. You have to ask and compare. My daughter, who has Crohn’s disease, is on a dual-med therapy that requires a folic acid supplement. I immediately decided that I would buy that over the counter, knowing I could get a full bottle for under $10. I assumed a prescription would be more. Then, I asked… and I was shocked! A full month of the supplement only cost us 47 cents! However, for her iron supplement, buying over the counter was half as much as the prescription. You have two resources for this comparison. You can call the insurance company nurse line to discuss the medication you’ve been prescribed to find out if there are generic or over the counter equivalents. Then, you can ask your pharmacist to price them all out for you. (Another option is GoodRx, but I’ve never tried that app.)
  • Shop Around for Non-Urgent Procedures – Need an MRI, a hip replacement, or back surgery? You might find a drastic difference in price across town or across the country. There are now websites that allow you to shop around for the cost of specific procedures, and the variation in price may shock you into medical arbitrage. If you need a hip replacement in the Austin area, you can find prices ranging from $19,000 to $25,000, but if you’re willing to travel a short distance to Baton Rouge, LA, you can find the same procedure offered at half the price. Of course, you want to do your due diligence and make sure that the doctor/surgeon meets high standards and has positive reviews, but when you’re paying a 20%-50% co-insurance, that could amount to significant savings.
  • Negotiate – Everything is negotiable, especially medical bills. You might even be able to use the info gathered above to talk your doctor and facility down in price for the procedure you need to schedule. Even if you weren’t able to negotiate a lower price in advance, you may be able to call the hospital or doctor’s office and negotiate a discount after the fact, especially if you can pay in full or put more than half down right away. I’ve heard that doing these negotiations on your bill before leaving the hospital or surgery center will get you the best results.
  • Pay Cash – Sometimes you can get an even bigger discount when you pay out of pocket instead of going through an insurance claim.
  • Care Credit – If you’re planning to put medical expenses on a credit card, ask your doctor’s office about care credit. They can call to get an authorization on your behalf, and you’ll often be given a 0% interest offer for a certain number of months. Be sure to set up auto-pay to cover the full amount of the bill before the promo period ends. You’ll also earn points for paying your bill each month, and you can trade those points in for gift cards to popular retailers. We’ve been paying down a colonoscopy, and we just cashed in on $200 worth of Home Depot gift cards.

I’m sure there are many other ways to save on medical costs, and I’d love to hear from you on what’s worked.

Today’s action step is to set up a health profile or journal for each member of your family. (If you already have one, take a quick review of it.) This health profile can be a simple binder or spiral notebook with plenty of space for printed doctors’ notes, bills/receipts for procedures, and your own notes on reactions to meds, treatments that have worked well, allergies, common symptoms to common illnesses, dates of illnesses or odd symptoms. Organize it in any way that makes sense to you and decide if you want a separate one for dental and vision care.

I was so glad I had kept dental records on my kids because I received a huge bill from our dentist after my eldest child got a filling. The insurance company denied the claim with the reasoning that the exact tooth had already been filled. I checked the dental records from our previous dentist and was able to determine that that tooth had never been filled. The last dental office had billed incorrectly.

This sounds like a lot of work, but having good records for each family member can save so much money in the long run, and it may help when trying to make tough decisions about proper treatments in the future.

Save on Utilities

Financial Freedom in 2021! Take Action: Day 14

This morning, my husband remarked that our kids are all great at turning lights on yet can’t quite figure out how to turn them off. Another friend had a similar problem with finding her backdoor open throughout the day. She said she’d start charging the kids $1 each time the door was found open. On a podcast interview a few months ago, I heard a great story told by The Budgetnista about her dad’s utility pet peeve and what he did about it. On his daughter’s designated day to buy a treat from the ice cream truck, he told his young girl that he didn’t have any money for ice cream because the water man had come by just before the ice cream truck did. He had to give the water man her ice cream money to pay for the water she had let run for several minutes.

No matter your age or background, I can pretty much guarantee that you’ve heard multiple complaints about water, electricity, and/or gas being wasted, potentially risking your family’s entire financial future. 😉

How much does it actually cost to leave a light or your TV on all night? What if you leave your cell phone plugged in after it’s fully charged or your freezer door open for a couple minutes while you ponder which ice cream flavor you’re craving most?

The answer is: Pennies.

How much does it cost when you keep the fridge door open?

These bad habits won’t break the bank, despite how often your dad may have yelled at you to shut the darn fridge before you let ALL the cold air out! Thanks to energy-saving appliances and light bulbs, our modern homes are costing less and less energy (and cash) to operate, but if you’re clinging to that “vintage” equipment, like an old stereo or TV, those will waste significantly more.

The biggest energy expense, though, is likely your air conditioning or heating, so it’s still ok for you to nag your kids about closing the back door. Check out these recommendations for keeping A/C costs down, and then read through the list below on additional ways to cut costs on electricity, cell phone service, TV streaming, and gas.

  • Get an energy audit. You can call your electricity-provider to analyze your specific home to determine where/how you can save energy and money.
  • Give away that old beer fridge in the garage. It likely sucks more energy than you think. Try moving all of your beverages inside and unplugging ye olde beer fridge for a month to see the savings. In our previous house, that one change decreased our bill by $50 per month! 😳
  • Break free of the old-school cell service contract. Try a more affordable month to month cell phone plan that operates on the same network as the big guys. https://www.nerdwallet.com/blog/utilities/cell-phone-plans/
  • Eliminate bad gas… habits. 😊
  • Conduct a TV Analysis. Keep a record of all TV watched over a 2 week period. Which channels are the favorites? Which streaming service is accessed the most? Once you’ve tracked your family’s TV habits, get rid of everything not often accessed. If you’re hanging onto Netflix because there’s one show you want to binge watch, but you don’t use it much otherwise, then cancel the service. When you get a free weekend to consume all the seasons of that one show, borrow a friend’s access info or do the free trial (then set a reminder to cancel before the month is up).
  • Reduce water use. Cutting down the length of your shower by just 4 minutes can save 200-300 gallons per month. Converting to Energy Star appliances can save 20-30 gallons per wash cycle. (With an older appliance, avoid the permanent press cycle – it uses 5+ extra gallons.) Add aerators to your faucets to save around 20 gallons per day, and switch to low flow toilets to save a few gallons per flush.

Today’s action step is to look up and jot down what you spent on electricity, water, gas, cell service, and TV streaming in the months of Feb and March of 2020. Then, immediately start implementing the above changes to your utility usage. Finally, set a reminder in a few months to compare your bills from this year to last. Hopefully you’ll see a savings, and if you do, keep it up!

Save on Kids’ Activities: Get Creative with Extracurriculars

Financial Freedom in 2021! Take Action: Day 13

Gymnastics for the preschooler to help with balance. Music class for the baby to encourage language development. Soccer for the big kids to teach sportsmanship and teamwork. Riding lessons for the horse-lover. Dance camp for the tiny aspiring ballerina. Yoga or a Bible study group for Mom’s mental, physical, and spiritual health. Monthly golf games to counter Dad’s work stress. A YMCA or pool membership for the whole family to spend time together.

It’s all too much. These extracurriculars can become easily justifiable, but the expenses quickly add up. I’ve often heard friends of mine say there’s nothing that can be cut in these areas; I’ve been there before too. We’ve tried all of the above, but I needed to cut back. We were over-committed and over-spending. Plus, the kids weren’t getting as much out of every experience as I had hoped.

I quickly realized that we had to limit everything to what was providing the most value and determine which extracurriculars could wait til later. This required asking some hard questions and thinking outside the box (or even counter-culturally) for solutions.

I recommend asking the following questions before signing up for something or continuing with an extracurricular activity:

  • What’s my WHY? What’s the true reason for this membership/activity/group?
  • If I’m doing this to learn a skill, can I learn it for free from a library class, a You Tube video, a good book, or a friend?
  • If I’m doing this so my kids will learn teamwork and participation, can that be accomplished through free school activities such as UIL or PE classes already offered? Can I organize a weekly kickball game in the neighborhood?
  • If I’m doing this to make friends for myself or my kids, can I find other options such as a neighborhood bunco group or small group at a local church or a nearby parent/child playgroup? (Search Facebook or Meet Up and ask around for options.)
  • If I want to start a young child in a sport or activity that I love, can it wait until he/she is a tad bit older? Many times, we sign our kids up for something and get so disappointed when they show no interest or seem to have no idea about what’s happening. But give it a few years and that will likely change. Also, at an older age, kids can articulate what they do and don’t like about an activity, helping you determine which are truly the best options for them. Despite considering lessons as an earlier age, my eldest daughter got into music, theater, and dance once she entered middle school. Because she was old enough to know what she liked about them and was mature enough to put in the effort necessary, she learned new skills rapidly, much faster than the pace that would’ve been required had she started in elementary school with private lessons. And the middle school classes are free as a part of her school day.
  • If the extracurricular is for exercise, what are our family’s favorite options to get in free work outs? What about that class, sport, or gym truly motivates us? Can it be replicated elsewhere, including at home or in a local park?

When you determine which extras are most important to you and your family, consider the following solutions or alternatives to save money:

  • Swap hours with a friend. Maybe you can tutor her kids and she can teach sewing to you and yours. Maybe you can mow a friend’s lawn in exchange for guitar lessons for your kiddo. Maybe you and a neighbor can swap babysitting hours for kids’ swim lessons.
  • Take a You Tube class. My 5 year old occasionally asks to attend dance class. We’re not sure if she’s truly that interested in learning dance, if she likes the idea of dance because friends attend lessons, or if maybe she just wants to wear a leotard and tutu. So, we found a You Tube channel with adorable and easy-to-follow ballet lessons. When my little one is “in the mood to dance”, she goes to that channel and follows along. She’s quite good at it, but she’s not consistently interested, and this type of video lesson is enough to satisfy her for now. We’ll reassess in a year or two but save our money for the time being.
  • Offer to work. If you love your gym or yoga studio or Pilates class, can you offer to work one morning a week at the front desk in exchange for a membership or a significant discount? What if you volunteer for the sports board? Can you get a discount on registration? It doesn’t hurt to ask.
  • Skip the skills camp in the summer (for younger Rec-level kids). A week of soccer camp can cost as much as the fees for a whole season of Rec soccer. A week of dance camp is equivalent to a few months of classes. A week of horse camp can exceed the cost of 5 private lessons, and while at camp, riding time might be very limited. If you still want your kiddo in camps for summer so they can be with other children and get out of the house, I get it! Try swim team, which provides daily swim practice for 2 months and a team full of friends for a fraction of the cost of private lessons. Check out the local VBS camps in your area. Most are free. Libraries (if re-opened this year) often offer free summer camps or day programs as well.
  • Take advantage of all the extras offered when you register. Does enrollment of the gymnastics class allow you to attend open-gym days for extra practice time? Does your sports program offer additional clinics or trainings? Does the gym membership offer 2 hours of child care? (If so, then exercise for an hour and use the extra hour to catch up on work, reading, phone calls, etc.)

Today’s action step is to re-evaluate all the extras. Be sure to know WHY you’re involved in them and whether they’re worth what you’re paying. If not, cancel and try an alternative!