by Jessica W on October 20, 2009
Next month is open enrollment for our family. I dread this season. My husband works for the state government, which gives us a broad range of choices—six this year.
This is the first time we’ve had to consider the whole family on one plan—and to shop around for the best deal—the last time we’d added our newest daughter and I on the plan as secondary insurance—just in case of layoffs at my company. It turned out to be a good move, as it became our primary insurance within a month.
So, how do you compare plans?
Our options range from $373 a month to $71 a month for our family of four—but how does one choose the best plan for their family? How do you compare tiered versus flat-fee prescription coverage? What about formulary/non-formulary medications? How do you compare deductibles, annual maximums and other items?
These questions and growing dissatisfaction with our current company’s bizarre fee structure has had me probing this problem for answers—and the best deal.
Here’s what I’ve discovered:
1. You must consider your needs. While my family is in generally good health, both of our daughters have chronic manageable health conditions that require extremely expensive medications. For us, a $2,000 annual maximum is no problem—provided we know we’re not going to be spending $10,000 on medications in a year. That is to say, we’re all in good health when we’re on our medications. If we expected an inpatient hospital stay or a kidney transplant to be part of the process, we may choose a different plan.
2. You must consider your providers. Who do you want to be seeing? I called our doctor’s office to see which plans are accepted. I also called the social work department at our local Children’s Hospital to see what they recommend in terms of coverage based on our kids’ conditions. The hospital informed me that because we make less than $106,000 annually—they won’t bill us for anything beyond our insurance company’s share of the bill. We just have to provide quarterly income verification. I wish I knew this about $2,000 ago.
3. Consider your health, both physical and financial. Can your savings account take the hit of you in the hospital for a week? Can you cover 25% of an inpatient stay, or should you look at a plan with a co-pay of $200 for an inpatient stay? Take annual maximums and deductibles into account. On our plan, an annual deductible of $4,000 per family is really not that bad, considering we only pay $123 a month.
4. Consider your prescription uses. I called our pharmacist and asked for more info about our co-pays. One of my daughter’s medications ranges from $5 a dose to $5.80 a dose. Our current insurance just has us pay 30%, not a fixed amount—so our co-pay varies with the cost of the drug. She suggested I ask the prescription plan about specifics on the medication. Our youngest will require extraordinarily expensive medications soon, so I called the prescription plan to inquire. They provided me with an online calculator that shows the current price (just like a commodity) of each drug so I could calculate my price. (Usually about $44 a month). They then said that if our doctor would fill three months at a time, we could get 3 months for a total of $50. (A savings of $328 a year!). I could calculate the medications that our littlest daughter will be on later and see that, as feared, they’ll be expensive.
5. Don’t forget to consider all of your options together. Remember the little daughter with the crazy-expensive meds to come? She doesn’t need them yet, but she will, and a 30% co-pay could be devastating, but remember option 2? Our little one’s medications are covered through the hospital’s pharmacy (our regular pharmacy won’t even carry the meds)—and any part not covered by insurance is covered by the hospital.
In the end, it turned out that the insurance company we have is actually the best deal for our family. Ultimately, I’m disappointed (and embarrassed) that I didn’t learn to navigate this plan a little better when we first signed up last year—it would have saved us almost $5,000. If you don’t understand your health insurance, trust me—it’s worth the time to sit down and figure it out. It took me about a half day and a half-dozen phone calls, but was well worth the effort.
by Jessica W on October 19, 2009
image credit: Freedigitalphotos.net
I’m financially preparing for disaster. My family has been notified by FEMA that our home is now in a flood zone—already, preemptively declared an emergency.
You see, we live on a river. Upstream is a very effective flood-control dam. In the 15 years our home has been here—it hasn’t flooded. We’ve been here since 2004 and have never even been concerned about the water. We couldn’t even get quoted on flood insurance because it was deemed unnecessary.
That all changed after a storm last year that put pressure on the dam, and an earthen abutment that supports the dam was seriously compromised.
Now we’ve got our flood insurance, and we’re preparing for the worst. As you can imagine, that includes sandbags and plastic bins and high shelves, but there’s also some financial preparedness that is key to surviving a disaster intact.
Steps to financially weathering the storm
Read your insurance policy:
We live in a condominium, so our insurance works like renter’s insurance. We cover anything not nailed to the house (furniture, personal articles, appliances) they cover flooring, drywall, windows, carpets and the building itself. This means I had to read both policies to verify our actual coverage! In the end, I discovered that neither policy will cover loss of use on our building. If we can’t live here—we still have to pay the mortgage, and we aren’t provided any money to pay for a hotel. Thank goodness that mom has an extra room big enough for the whole family. If the dam fails however, our losses are projected to be catastrophic—and we may be at mom’s house a couple of years until our place is rebuilt. I’m working with a broker to create a specific “loss of use” policy to cover our time out of our house if we have to evacuate long-term.
Document your belongings:
Our insurance policy will only cover the value of our items—which means we’ll have to itemize everything we want covered. We’re doing this with a digital camera. Going room-by-room and taking photographs. Receipts for high-dollar items like the piano, and appliances need to be packed in a plastic bag and put with our evacuation “stuff.”
Put things you need during/after the disaster OUTSIDE the disaster zone:
There’s a bin in the house where the “stuff” goes. This is everything we need to recover.
Banking info
Insurance Policy
Blockwatch phone list
Critical papers including recipts for appliances, etc, the kids’ adoption papers, etc.
These things aren’t “valuables” per se but it’s doubtful if we could put our lives back together easily without them.
Also in this bin is a disk with the photos of our belongings (backed up on Shutterfly in case we have to send them to our adjuster—they can be sent electronically immediately).
The bin is big enough for 3 days of clothes for each member of the family, our prescription medications and a bag of pet food. The emergency bin will go with us when we evacuate.
In the event that the evacuation order comes—the kids can pack remainder of the bin while I pile up the sandbags and move some valuables. Our insurance policy also provides $1000 towards sandbagging and $1000 towards removal of items that may otherwise become claim items (i.e. art, jewelry).
Save the money!
Our deductible is $1,000. It’s set aside in a separate bank account until the dam upstream from us is repaired—a five-year dedicated fund planned for flood, so we don’t find ourselves in a financial pinch paying the deductible and staying on our feet—however damp they may be.
Do you have a plan?
It sounds strange living a stone’s throw away from a river, but our disaster plan was really only prepared for the “3 days 3 ways” to stay put in our home in case of ice/snow, earthquake or power outage—we found our emergency plan totally unprepared for evacuation, and our home ill-prepared to meet the requirements of our insurance company. Have you considered and prepared for local and regional disasters that may force evacuation from your home?
by Jessica W on October 18, 2009
Picture by Jeff Keen
I’ve wrestled with budgeting since becoming self-employed. How could we possibly budget when we don’t know from month to month how much income I’ll make?
Due to overtime, my husband’s income also varies pretty wildly, but we know the minimum and plan based on that.
I’ve finally reached a point where I think I’ve figured out a plan that works. I’m a slow learner. Don’t laugh. Starting two businesses in one year and managing the household finances is a big project for any gal! For those of you wandering around in the dark trying to figure this out like I was; here’s what I’m doing.
List your fixed expenses in order of priority—top to bottom
If you don’t have a budget, don not proceed. Do not pass go, go back a few steps and figure out your fixed and variable expenses for the month. This list should be the minimum you need to survive normally and keep the lights on and keep your credit intact. The minimum. I mean it!
Make a second list, in order of priority of items that you want/need.
This should be the list of all the “stuff” you want or need. Your emergency fund, paying off debts, savings for furniture, Christmas gifts, etc. The order of priority may change from month to month, so be prepared to change this list frequently.
Now what?
Now, with your monthly income, you pay the items from your fixed expenses, in order of priority. You make minimum payments on any debts. With any “variance” above that amount you apply it to the next item on your “wish list” (our first item is emergency fund, and second is an itemized list of each of our debts and after that we get into “stuff”).
If your minimum monthly income is not enough to meet your monthly fixed expenses plus minimums on debt payments, you need to slash your fixed expenses, and divert part of your income from a high month into a rollover fund—that can be spread in to fill the gaps in super-low months. You also might need a second job.
Being self-employed for nearly a year now, I’ve got a good idea of my average income per month and have a few “side hustle” tricks for picking up the income if it’s looking too low late in the month. I keep a running “work in progress” spreadsheet that shows all of my lines of business with rows for the projects that I’m billing and then a column for each month. I put the income amount in the month that I expect to receive the payments so that I can see my anticipated income each month. Each time an invoice is paid, I just hide that row. If I know a customer is going to slow-pay me, I just move it out a month, removing the “income” from this month’s projections and into next months.
By applying any income beyond your essential items in order of priority, you give yourself permission to stop spending when you run out of income for the month. You simply pick back up in the same place when your next check comes in—with the next paycheck, or invoice payment. If crisis hits and you can’t pay everything on your fixed list—you’ll be skipping purchases or payments on the least critical items (you sorted them by priority, remember?). You won’t find yourself foreclosed on or without food for the sake of paying or buying whatever was on your mind. Hopefully, this strategy will give you a plan, and with a plan will come peace of mind.
Good luck!
by debt kid on October 15, 2009
Crap Happens.
You know the more colorful phrase.
Bad things happen. Sometimes bad things happen because of our stupidity (guilty!), and sometimes bad things happen and that is just life.
“Nothing bad has happened in my life”
I had lunch with a friend today, in his mid twenties, who said, “Nothing bad has really happened in my life”
This isn’t uncommon for people my age. They had great childhoods. They didn’t see a family member struggle with mental illness. They haven’t faced any real major obstacles in their life.
When I encounter someone like this, my reactions split. Part of me feels envious, and the other feels sorry for them. When stuff hits the fan (and it will eventually), how will they handle it?
When it comes to money, some people make mistakes early in life (me!), others get hit with an illness or job loss and have no control over their circumstances.
Mistakes just make us human right?
It’s how we respond to those mistakes that define our paths in life.
I choose not to give up after I had to confront my massive trading losses. I was very tempted to give in. To just run away, and try to avoid the horrific pain I knew would be coming.
I’m glad I faced the fire. I have learned things in the past 3 years that I never would have had I not screwed up so royally.
It’s funny how sometimes our greatest mistakes can turn into the most opportune learning experiences. I know that’s been true in my life, and I imagine it’s better true of many of you as well.
What lessons have you learned when “Crap Happens”?
by Jessica W on October 14, 2009
Sooo…. It turns out, we spent the money in our envelopes, we paid the bills that the cash-flow plan told us to, and we still have money. That is to say, we haven’t bounced any checks, but we’re far from rich. There is one surprise though.
We’re ahead of where we usually are by this time in the month.
I haven’t stomped my feet and given up on the envelopes and the zero based budgeting yet, but yes, it is still scary. Another check came in this week and from it, I just started paying down the list on our cashflow plan (it’s in priority order, so that makes it easy). When the money ran out, I stopped paying, and it gets us 2/3 of the way through the list. Not too shabby. Another check will come in before the end of the month—and before the due dates on remaining planned items.
Plan ahead before starting this system
I’ll caution folks that this might be hard to start off on if, like us, you start your plan on the 1st but don’t get paid until the later. My husbands’ checks come on the 10th and 25th. I wish we’d stashed ourselves a bit of cash before we started on this. My income is self-employment income, so the timing is more erratic—depends on how current my clients are staying on their bills.
This does mean that I’ll be paying some items out of priority order simply because of due dates, but it’s no big deal if the phone bill gets paid before the grocery cash gets picked up at the bank—since I know we’ve got enough for both.
Time commitment
This is taking some maintenance time each week, but not nearly as much as I expected. I’d say about 10 minutes a week, though our first budget and cash-flow plan took the two of us a couple of hours to figure out.
How is this new?
The difference between my former method of managing the money and this cash-flow method–is that this truly is a plan. I know exactly what is getting paid based on priorities. It’s not a matter of paying great big payments on the credit cards (and patting myself on the back–only to find out I spent the grocery money), but it’s paying with purpose. There’s no panic or wonder, there’s no stress in it at all. There’s no concern about the fact that our income can fluctuate by as much as $3,000 a month. I simply pay down the list and in order of priority. When there is no more money, I just say “no” and that item isn’t getting paid at this time (the last 1/3 of our list is all debts, so while small payments will get paid in “low” months, I won’t be making giant payments).
It is fortunate for us that we don’t have to worry about not being able to pay something at all–but on this plan, if we were in that position, we’d know exactly where to stop and still be able to support our family.
Overall value
I’m a nerd, and my husband is a free spirit. I always want an extra cushion—and struggle with spending down to the last dime—even if the simple math tells me I can do it. I keep a little more than the plan says in the bank just to ease my mind and get used to the program. My husband doesn’t like to feel constrained to a “plan.” But both of us are feeling good about this program—because he doesn’t have to feel too constrained (the item is either in the budget, or must be put into the budget—at which point, sometimes it’s less important than initially thought). Likewise, I don’t feel too “loose” with the money—paying it all out pretty much right away, because I’m getting used to some of it being in cash, versus in the bank account.
I suggest giving it a try. One thing we love is that we can’t go over budget on the envelope system on a cash budget item (groceries, gas, etc.). It’s working great!
by debt kid on October 12, 2009
Update: I took a trip down to Portland to figure out this carpet mess. We ended up getting a SmartStrand nice Karastan (Division of Mohawk) carpet, installation and removal, 6lb pad, for $4800 for 1300 sq. feet. We used a local company, as they had the carpet in stock, vs. Home Depot, which would have to order it. All in all, I think we did well, and I’m excited about the new carpet. Still spendy though!
My mother is moving back into a rental house that she owns, her only real equity as far as her finances goes.
The house badly needs new carpet.
How much does new carpet cost?
Well, what I’m finding out is that it completely depends. It depends on the carpet mostly. Carpet is like cars. You can get a KIA or you can get a Porshe.
My mother had called empire direct, and I immediately told her to go with someone else (after reading some terrible reviews online). Their price was 4.36 a sq. foot, or 39.24 a sq. yard, including pad and install for what sounded like medium grade carpet. That price is high, right?
From what I’ve read, a decent carpet should run around $20-25 per sq. yard installed. My mother needs about 1500 sq. feet of carpet installed.
What’s been your experience with buying carpet?
by Real Estate Kid on October 7, 2009
Lately I’ve been reading a lot about the different ways people put extra payments towards their mortgage principal in order to pay it off faster and cheaper. You can save literally tens of thousands of dollars in interest payments over the life of the loan by doing this. Check this calculator here. In my case, if I pay $50/month more on my rental property payment, I would pay it off in just under 26 years as opposed to the original 30 years and save myself more than $25k in interest payments. This calculation assumes I started adding to my payment from the beginning of the loan. Imagine if I added $100/month extra, or even more!
There are a few very common ways of doing this:
- paying an extra amount in addition to your regular payment every month
- adding lump-sum payments to the principal balance
- setting up a bi-weekly payment plan
Option #1 is the easiest and most effective to implement in my opinion. You already have your mortgage payment automated (right?) so adding a little extra every month is is to “set and forget”. Option #2 could work well as long as you are able to manage your money well enough to consistently pay down your mortgage principal. If you choose this route, have a plan so you will know when you will pay a lump sum to this debt. This could when you reach a certain threshold in your savings account or you work overtime or receive “unplanned” funds some other way. Option #3 is becoming popular as well but some banks require you to use their service to implement this approach. For this you basically pay your mortgage every 2 weeks which adds an additional “monthly” payment over the course of the year. This works because it is biweekly, not bimonthly, meaning you make 26 payments which are half your normal mortgage payment (effectively 13 monthly payments) as opposed to 12 normal monthly payments.
Too Much Too Soon
Now I would love to start paying off any of my two mortgage or two home equity balances faster than planned. Unfortunately, I have credit card debt to handle first before considering where my extra money will go. This got me thinking of some long term questions since I do not really have a plan in place for my debt after paying off my credit cards.
- When will I be free of non-secured (credit card) debt?
- If I pay it off as I have planned, what will I do with the extra money?
- Invest in retirement?
- Pay off secured (housing) debt?
- Some form of both?
- Purchase another apartment to rent?
With that being said I now consider paying off my credit card debt my medium term debt (~3 years) and I’ve begun to think about my long term goals (>5 years) for after that. I’ll discuss my “master plan” in my next article.
by Jessica W on October 5, 2009
Dear readers. You have permission to call me a coward.
In the past ten months, my husband and I have really made great bounds in taming the financial situation of this household. We re-tooled spending, we began budgeting (first time ever) and we’ve so far paid off $34,000 in debt. But we’ve got a ways to go until we reach financial freedom.
Three weeks ago we began taking Dave Ramsey’s Financial Peace University (FPU) and learning Dave’s strategies (also outlined in Total Money Makeover). We’ve got our $1,000 in the bank and now we know what to expect to spend on everything each month.
Until now our “budgeting” has been fairly passive, but it’s still slashed our expenses. We set up a free budget template in Mint and then we get a text message when we go over budget. (It was more like behavior modification training than budgeting—something akin to those no-bark collars people put on dogs).
That said, when we got into the cash-flow plan in FPU, I was all for it until I sat down and started to put it into practice.
You see, the FPU plan calls for zero-based budgeting. That means you figure out how much you’re making each month, and spend it all on paper before the month is over.
Do you know what this means?
At the end of the month there is nothing left.
Quite frankly, this scares the living daylights out of me. Nothing in the bank and just $1,000 in savings between us and the real world? It feels like flying without a net to me in a wildly uncomfortable way. There’s nothing adventurous about this at all.
This is a little extra tricky because both of our incomes vary pretty wildly from one month to the next.
Now on the zero-based budget, the next paycheck will get deposited, the mortgage will be paid, and the rest will be cashed out into the envelopes. Leaving nothing in the bank. ::hyperventilating::
I’ll grant you that this has happened before, but never on purpose!
I’m committed though (figuratively, not literally…yet). This system is tried and true, and my “oh crap we’re outta money” text messages were passive and reactionary. In my mind, I knwo this. Having a plan is always better. I can do this, right?
Anyone else using zero-based budgeting? Are my fears irrational? Normal beginner’s jitters? Would love to hear your thoughts!
PS: For those wondering what we do with our fluctuating incomes to make a zero-based budget balance, we have a prioritized “wish list” (it begins with our remaining debts, and works up to items like new carpeting for the condo, replacing the kids’ mattresses, and saving for the next car). Months that we earn more than our budgeted incomes, the money is directed to the top item on the wish list. If we earn less than our budgeted amount, then we don’t fund items in our budget from the bottom up (planned debt repayment in excess of the minimum, recreation, “blow money” etc).
by Jessica W on October 4, 2009
Back in December when I was laid off from my regular 9-5 job and decided to pursue self employment in lieu of reliable income, I did some pretty serious bill slashing.
I called every service provider to our household and demanded a better deal. In all but one instance, I got a better deal. Now for ten months, I’ve been resting on my laurels.
We’ve been in our Financial Peace University (FPU) class for three weeks now so we’re in to budgeting and cash flow, and had to create a zero-based budget. More on this later, but ultimately, it makes me really uncomfortable, so I wanted to whack down our fixed expenses even further.
This week I took a look at all of our expenses from largest (house) to smallest (my gas money—at about $35 a month) and made some likely targets for a better deal. Here are my results.
Newspaper
My husband likes to read the NYT on the ferry to work though, but he doesn’t touch it on weekends. Total cost: $65.00/mo It really was always our intentions to read the weekend papers… but, well, you know where good intentions get you. This week I phoned the circulation desk and asked for a deal. Could I drop the weekend papers? They seldom do this for residential addresses, but they agreed. New cost: $30 a month!
Mobile Phone
I have a contract with my provider. Two lines, two phones with data plans. I use my phone for my business, but rely very little on actual minutes—more on the ability to send/receive data on the road. I checked out the competition with www.billshrink.com and saw that my $260/mo bill wasn’t exactly competitive. Mind you, I’m under contract, so I don’t have a lot of leverage here, but I tried anyhow. I called and asked for a plan “that fit the family better.” And they were happy to oblige—reviewing our past use history, and reducing our bill to $120/mo with no change in service. Just fewer “anytime minutes” (though we’ll still have more than we’ve ever used in a month). Total savings: $140/mo!
Food
We’re a family of four, and food is a major expense. I’ve been tackling this with a series of $1/serving dinner recipes, but have also found that meal planning saves a fortune on food. We’ve literally knocked our weekly grocery bill from $150/week a year ago to $90 a week now (and that’s adding one person and disposable diapers to the expenses!) We don’t waste food due to spoilage. We also batch cook a few “convenience” meals for those days when nobody wants to cook. Total monthly savings $120
It’s amazing the difference that such a few little changes could make! The total monthly savings of these easy changes is actually $295!
by debt kid on October 3, 2009
I’m sitting in my office. It’s nearly midnite on a Saturday night.
No, my girlfriend didn’t break up with me. She did however, go home early tonite because she wasn’t feeling well. We’ve both been dealing with a nasty bug this week that seems to have infected half of Seattle.
I already worked about 5 hours earlier today. My full time employee and I were at Ikea picking up a few odds and ends for my office. We hired a few new part-time workers this last week, and needed to setup a few more workstations. I don’t usually work weekends much anymore, but it feels good.
Sometimes I’m amazed at how quickly things have changed for me. I’m not out of the debt woods yet by any means, but I’ve made some really big strides this year. I sleep better. I have a girlfriend I’m going to propose to in the near future. I have a mattress to sleep on!
Gotta love having a mattress!
A mattress to sleep on in an apartment that’s warm. Do you realize it was just two summers ago that I was sleeping on the floor of my office, and sometimes in my car???!!! Holy smokes. It doesn’t actually seem like that long ago. And yet, at times it seems like ages. It’s weird how some events are like that.
New Project: Coming Next Week
I’ve got a new project in the works that I’m pretty excited to share about with you guys, probably next week. It will be the first one that I can actually share about here, since I’ll be working on it as DK.
What are you happy about?
What are you happy about this weekend?
