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How to Avoid the Financial Blunders People Make in Their 20s

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Nobody is perfect when it comes to their finances — even millionaires slip up sometimes.

So when you start to think you’re worse off than your parents, or your nephew, or your friends, remember that all 20-somethings have made mistakes that can cost them big time.

But if you’re guilty of making some of these blunders, don’t fret. You can still redeem yourself! Here are some of the worst blunders you can make, and tips to help dig you out of the hole.

Blunder No. 1: Not Getting Free Gift Cards When You Shop

What do you usually do with your receipts? You check out, they hand you a mile-long piece of paper, and you frantically stuff it to the bottom of a grocery bag. Pretty worthless.

But a free app called Fetch Rewards will turn them into gift cards. It partners with tons of brands to give you points for every grocery receipt you share. Then you can exchange them for gift cards to places like Amazon, Walmart, Chipotle and dozens of other retailers.

And it’s perfect for those of us who don’t want to put a ton of work into this. All you have to do is send Fetch a photo of your receipt, and it does everything for you. No scanning barcodes or searching for offers — and you can use it with any grocery receipt.

When you download the app, use the code PENNY to automatically earn 2,000 points when you scan your first receipt. Then start snapping photos of your recent receipts to see how many points you can earn without a single trip to the store!

Not so bad for a useless receipt, right?

Blunder No. 2: Not Earning Anything On Your Savings

You’ve probably heard the best way to grow your money is to stick it in a savings account and leave it there for, well, ever. That’s bad advice.

But maybe you’re just looking for a place to safely stash it away — but still earn money. Under your mattress or in a safe will get you nothing. And a typical savings account won’t do you much better. (Ahem, 0.05% is nothing these days.)

But a debit card called Aspiration lets you earn up to 5% cash back and up to 20 times the average interest on the money in your account.

Not too shabby!

Enter your email address here to get a free Aspiration Spend and Save account. After you confirm your email, securely link your bank account so they can start helping you get extra cash. Your money is FDIC insured and they use a military-grade encryption which is nerd talk for “this is totally safe.”

Blunder No. 3: Paying Too Much Interest To Credit Card Companies

If you have credit card debt, you know. The anxiety, the interest rates, the fear you’re never going to escape…

And the truth is, your credit card company doesn’t really care. It’s just getting rich by ripping you off with high interest rates. But a website called AmOne wants to help.

If you owe your credit card companies $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.

The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.

AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.

It takes two minutes to see if you qualify for up to $50,000 online. You do need to give AmOne a real phone number in order to qualify, but don’t worry — they won’t spam you with phone calls.

Blunder No. 4: Paying Too Much For Car Insurance

When’s the last time you checked car insurance prices?

You should shop your options every six months or so — it could save you some serious money. Let’s be real, though. It’s probably not the first thing you think about when you wake up. But it doesn’t have to be.

A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.

Using Insure.com, people have saved an average of $540 a year.

Yup. That could be $500 back in your pocket just for taking a few minutes to look at your options.

Blunder No. 5: Thinking You Don’t Have Enough Money To Invest

Take a look at the Forbes Richest People list, and you’ll notice almost all the billionaires have one thing in common — they own another company.

But if you work for a living and don’t happen to have millions of dollars lying around, that can sound totally out of reach.

But with an app called Stash, it doesn’t have to be. It lets you be a part of something that’s normally exclusive to the richest of the rich — on Stash you can buy pieces of other companies for as little as $1.

That’s right — you can invest in pieces of well-known companies, such as Amazon, Google, Apple and more for as little as $1. The best part? If these companies profit, so can you. Some companies even send you a check every quarter for your share of the profits, called dividends.1

It takes two minutes to sign up, and it’s totally secure. With Stash, all your investments are protected by the Securities Investor Protection Corporation (SIPC) — that’s industry talk for, “Your money’s safe.”2

Plus, when you use the link above, Stash will give you a $5 sign-up bonus once you deposit $5 into your account.*

Blunder No. 6: Assuming Life Insurance Is Expensive And Time Consuming

Have you thought about how your family would manage without your income after you’re gone? How they’ll pay the bills? Send the kids through school? Now’s a good time to start planning for the future by looking into a term life insurance policy.

You’re probably thinking: I don’t have the time or money for that. But your application can take minutes — and you could leave your family up to $1 million with a company called Bestow.

Rates start at just $16 a month. The peace of mind knowing your family is taken care of is priceless.

If you’re under the age of 54 and want to get a fast life insurance quote without a medical exam or even getting up from the couch, get a free quote from Bestow.

1Not all stocks pay out dividends, and there is no guarantee that dividends will be paid each year.

2To note, SIPC coverage does not insure against the potential loss of market value.

For Securities priced over $1,000, purchase of fractional shares starts at $0.05.

*Offer is subject to Promotion Terms and Conditions. To be eligible to participate in this Promotion and receive the bonus, you must successfully open an individual brokerage account in good standing, link a funding account to your Invest account AND deposit $5.00 into your Invest account.

The Penny Hoarder is a Paid Affiliate/partner of Stash. 

Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk. 

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com



Should I stay or should I go? Wrestling with the decision to quit a career

J.D.’s note: In the olden days at Get Rich Slowly, I shared reader stories every Sunday. I haven’t done that since I re-purchased the site because nobody sends them to me anymore. But earlier this year, Mike did. I love it. I hope you will too.

Earlier this year, I sent my wife a text message: “On a scale of 1 to 10, how freaked out would you be if I quit my job this afternoon?”

My wife and I had only been married a short while, but she’d known since our second date that I didn’t plan to work in my traditional job until normal retirement age. She also knew that I hadn’t been very happy at work in recent months.

We’re very compatible financially — both savers raised in working-class families that didn’t always have a lot. We make a point of having what we like to call “Fun Family Finance Day” from time to time. On Fun Family Finance Day, we do everything from competitively checking our credit scores to discussing questions that get at the root of our money mindsets to help us create our goals.

But this question wasn’t part of the plan. Not then.

And it was never on any of the lists of questions that we’d discussed with each other. It was like a pop quiz, a pothole in the smoothest relationship road I’d ever traveled…and I was the one putting it there.

Dreams Remain Dreams Without Doing

My wife and I rarely argue, but when we do it’s usually about food. It’s the kitchen and the grocery store that are our battleground. Our finances are fine. Thankfully, when you’re confident in the life you’ve created and the person you chose to build it with, it’s a lot easier to be honest about what’s on your mind.

That still doesn’t always mean you get the answer you want. Or the answer you were expecting. She responded: “Wait what. Kinda. What would you do?”

A completely reasonable and fair question. Not to mention one that I’d probably have to get comfortable answering from a lot more people.

I think my immediate reaction was: We talk about this stuff all the time, where is my, “No worries baby, YOLO!”? (I must have watched too many romcoms back before we cut cable from our lives.)

Being a grownup, it turns out, is actually really hard sometimes. I was about to learn that talking about something, and actually doing it, are a world apart.

Life is full of dreamers and doers. Sometimes those two personalities cross over. But there are plenty of people who go through life talking about so many things they’ll never have the courage to try — or the discipline and determination to follow through with.

Which person was I? The dreamer? The doer? Or that fortunate combination of both?

Standing on the Ledge

There’s a quote perched atop my bucket list of long-term goals:

“At some point, you will need to take a long look in the mirror and ask yourself not just if this is something you wanted to do at one point, but if this is something you will want to have done.”

Words are meaningless without action. It was time for me to take that long look in the mirror. I thought back to one of the questions that my wife and I had previously discussed: What does money mean to you? To me, once I grew out of the “stuff accumulation” phase of my early- to mid-20s, my answer had always been freedom. Money meant freedom. To my wife, the answer was security. Money meant security.

You can probably see how freedom can conflict with security. That was the case here. Not only that, but I was asking to change the perfect plan, one that she was comfortable with and excited about.

That’s not one, but two shots against financial security. If I’d thought more about our financial blueprints and how they differ, I might have seen this coming from a mile away!

As I was standing on that ledge, about to quit my job, thoughts started to race through my mind. What did I actually have to lose if made the leap? Lots.

  • A happy relationship and marriage.
  • A secure job with solid income, not to mention a sixteen year investment in my career.
  • Great benefits, including lots of time off, health insurance, 401(k) — even a pension.
  • The ability to afford anything at any time without any real worry. (Our finances were already on autopilot.)
  • My work friends and work prestige.
  • The general day-to-day purpose of a job.
  • The opportunity to create generational wealth. If we worked until 65, the power of compounding would likely make us ridiculously wealthy.

Today at Get Rich Slowly, let’s perform a little exercise. Come stand in my shoes for a minute, won’t you? Join me on the ledge. Do you see the beautiful view? The endless opportunity? The excitement that’s felt only at the beginning of a grand adventure, an adventure where anything is possible?

Or do you get a queasy feeling in your stomach? Do you feel like you’ve lost your balance, like you’re on the edge of some great catastrophe? Do you see a frightening fall from grace? Does it make you want to back away immediately?

Let’s go back to what it felt like to make this decision…

Sitting on the ledge

My Situation

I’m 38 years old. I’ve worked for the same company since I was 22. Corporate insurance is all I know. I’m well paid. I work from home for a solid company with good benefits, plenty of time off, and I really enjoy most of the people I work for and with.

It’s the definition of stability — a solid guardrail protecting me from what lies over the ledge. So what’s the problem?

A year ago, I took a new position that seemed like a great opportunity. Only it wasn’t. The first misstep of my career. A year in, that spot has killed my enthusiasm and engagement. For the first time at work, I’m struggling to get things done.

As an extrovert that derives meaning from helping others, this feels like a prison. My job isn’t hard because it’s stressful. It’s hard because it’s boring me to death! And what are any of us doing thinking about personal finance and early retirement if we aren’t trying to make better use of our limited time on this planet?

There’s a project looming that would require some weekend work once in a while for the foreseeable future, I’ve avoided it in the past, but my luck is running out. My team — and, more importantly, my position — need to take it on. I understand completely. I just don’t want to do it.

At this point in life, my time is way more important to me than money. The weekends and vacations are what I live for. Adventures in the mountains with my friends, quality time with my wife, our dog, and our families – that’s what makes me feel alive.

Insurance? Meh.

No little kid ever said they wanted to work for an insurance company and play with spreadsheets and Powerpoint presentations when they grow up. I wanted to be a baseball player, a sports writer, even a professional forklift driver. (Because what’s more badass than a forklift when you’re a little kid and your dad works at a marina?)

A Glimpse of the Other Side

My wife and I just got back from a delayed honeymoon to Alaska. To say it was incredible would be an understatement. Denali. Kenai. Majestic train rides. Fjords. Glaciers. Bears. Bald eagles. Whales. Hikes.

Life slowed down.

I somehow managed to read five books while doing so many other amazing things. During our more than two weeks off, I got to see what my mind was capable of when it wasn’t drowning in useless information and mundane tasks that consume my braindwidth.

We talked to people who had ended up in this wild place through a history of taking risks. Parents that had hitchhiked cross-country and ended up there back in the 70s. Can you imagine? Where we live, a fair number of people never leave their town or state!

Before the trip, I had tried to apply for a few positions. For whatever reason, it just didn’t work out. I came home from an amazing glimpse into what life could be to a job that seemed like the polar opposite. (Isn’t that every vacation though?) I’ve felt like a square peg trying to fit in a round hole for a while now. Maybe normal life just isn’t for me anymore. Maybe I need something just a little less ordinary.

Should I Stay or Should I Go?

I’ve been practicing the classic tenets of personal finance since I was in my mid- to late-20s. I found an awesome woman in my mid-30s who just happens to be down with this lifestyle as well. We’re probably two to three years short of where we want to be based on our master plan of a fully-paid house and a really comfortable number in invested assets.

We’d likely fall somewhere between Agency and Security on the stages of financial freedom.

I know good jobs don’t grow on trees, especially where we live. The seasons of the economy are always shifting and there’s a chill in the air. Economic winter can’t be too far off. My wife still has a solid job, and we live a pretty simple life — albeit in an expensive part of the country. Our main splurge is travel, but otherwise we live well below our means.

All of this knowledge and preparation comes with a cost. Having options can be a burden too, because then you’re responsible for making hard decisions. And you’re responsible for the outcomes of those choices.

What other options are there?

  • Be a crappy employee/teammate, and still get paid? Plenty of people have played that game. Get a surgery or two, go out on leave, let performance management run its course for however long that takes, and keep cashing checks the whole time. I don’t think I have it in me to put people I respect through that. It’s just not who I am.
  • I work from home, and I still can’t bring myself to abandon my laptop. What if someone needs me?
  • Am I giving up too soon? The finish line seems just around the corner — somehow so close yet so far away.
  • Should I just suck it up and sell a little more of my soul? Slump my shoulders a little bit more as I trade another piece of myself for money I don’t need to buy things I don’t want?

As I go back and forth, sometimes I briefly wish I’d never found the personal-finance community. Like Neo in The Matrix, why’d I have to take the damn red pill? Being a mindless consumer wasn’t so bad. I would have invested 6-10% in my 401(k) with a traditional pension on top of it.

Forty years on autopilot would have produced a comfortable life of work, nice things — and maybe some time in old age to relax and travel.

Facing Freedom

The whole point of everything I’ve done since I started this journey was to be in control of my own life. To not be owned by things or circumstances. To have options. Freedom of choice. F-U money.

I have the corporate battle scars and survivor’s guilt to understand why that’s important.

I’ve sat on the phone while I heard that my old department was closing down. The sadness and tears in the room. Everyone that had taken me in, given me my chance, taught me the job…basically gone, casualties of a business decision.

I’ve seen people get laid off who are petrified because they don’t know how they’ll pay their bills in a couple of weeks. People will be okay eventually though, right?

What about my friend who was struggling last year and left the company? He committed suicide a few months later. Maybe everyone won’t be okay eventually. Depression runs in my family. Am I really built for this? That thought is haunting.

It’s been said that one of the hardest decisions you’ll ever make in life is whether to walk away or try harder. Every bone in my body tells me it’s time to walk away, to bet on myself.

The End?

About six months after the text exchange that blindsided my wife, with her support, I hit send on the scariest, most exciting and important one-line email of my professional career. It would also signify the unofficial end of it: “I will be resigning from my position effective Wednesday, June 26th.”

To combine a few lines from my favorite movie, The Shawshank Redemption, some birds just weren’t meant to be caged. It’s time to get busy living, or get busy dying.

Source: getrichslowly.org



When to Cancel a Credit Card? 10 Dos and Don’ts to Follow

Maria O. says:

I’m a huge fan of the Money Girl Podcast and am also a Get Out of Debt Fast student. I’ve taken your financial advice and am glad to say that my husband and I are in a much better financial situation now.

We both have travel rewards credit cards with zero balances that we haven’t used in over a year. We know that canceling cards isn’t advisable, but we really want to stop paying the $95 annual fee. My husband’s credit score is 780 and mine is 818. What do you recommend?

Maria, thanks so much for your question and for being a part of the Money Girl community!

Before you cancel a credit card, it’s critical to understand how it will affect your entire financial life. Whether you should get rid of a card depends on a variety of factors, including your future financial goals.

In this post, I’ll cover 10 dos and don’ts for when to cancel a credit card. You’ll learn how to manage these accounts wisely so they improve your finances and don’t hurt them.

Before I cover each of these dos and don’ts, here’s an overview of why building good credit and using credit cards the right way is so important.

The benefits of building your credit

Having good credit simply means that you have a reliable financial track record according to the data in your credit history with the nationwide credit bureaus: Equifax, Experian, and TransUnion. Different credit scoring models use that data to calculate credit scores, which act as shortcuts for various businesses to evaluate you quickly.

When you have high credit scores, potential lenders and merchants have more confidence that you’ll be a good customer who pays their bills on time. That’s an incentive for them to give you top-tier offers, which saves you money.

Having good credit scores allows you to get the most competitive interest rates and terms when you borrow money using credit cards, mortgages, car loans, student loans, and personal loans. For instance, paying just 1% less for a mortgage could save you over $100,000 on the cost of a 30-year, fixed-rate loan, depending on the total amount you borrow.

However, even if you never borrow money to finance a home or charge a vacation to a credit card, having good credit gives you other significant benefits, including:

  • Lower auto insurance premiums (in most states) 
  • Lower home insurance premiums (in most states) 
  • More opportunities to rent a home or apartment
  • Lower security deposits on utilities 
  • More government benefits 
  • Better chances to get a job

RELATED: 12 Credit Myths and Truths You Should Know

The Connection Between Credit Cards and Your Credit

The only way to build credit is to have active credit accounts in your name and to use them responsibly over time. That’s where credit cards come into play.

One of the biggest factors in how credit scores are calculated is called your credit utilization ratio. It only applies to revolving accounts, such as credit cards and lines of credit, which don’t have a fixed term. Credit utilization isn’t measured for installment loans, such as mortgages and car loans, because they do have a set ending or maturity date.Credit utilization is a simple formula that equals your total account balance divided by your total credit limit. For example, if you have a credit card with a balance of $1,000 and a credit limit of $2,000, your utilization ratio is 50% ($1,000 / $2,000 = 0.50).

Keeping a low utilization, such as below 20%, is optimal for good credit.

Keeping a low utilization, such as below 20%, is optimal for good credit. So, by paying down your balance on the card to $400, you could reduce your utilization ratio to 20% ($400 / $2,000 = 0.20) and boost your credit scores.

A low utilization ratio says that you’re using credit responsibly. A high ratio indicates that you may be maxed out and even getting close to missing a payment.

Many people mistakenly believe that getting rid of their credit cards will automatically improve their credit. The surprising truth is that canceling credit cards usually hurts it because your available credit on the card plunges to zero, which instantly increases your utilization and causes your credit scores to drop right away.

However, whether closing a card is right for you really depends on your current and future financial situation. Use the following do and don’ts to know when ditching a card is best and how to do it with minimal damage to your credit.

RELATED: 5 Ways to Get a Loan With Bad Credit

10 dos and don’ts for when to cancel a credit card

1. Do cancel credit cards that are a net loss

If you’re like Maria and have great credit with an unused card that’s costing you money, you may want to consider canceling it. Many rewards cards come with an annual fee, especially when they offer cashback, airline miles, or points for merchandise. In some cases, using the rewards easily offsets the annual fee.

If you won’t use the card or can’t afford the annual fee, common sense should be the deciding factor, not your credit score.

However, if you won’t use the card or can’t afford the annual fee, common sense should be the deciding factor, not your credit score. However, one option is to replace a card that charges an annual fee with another card that doesn’t, ideally before you cancel the first one. That allows you to swap out one credit limit for another one and avoid any damage to your credit.  

2. Do cancel credit cards that tempt you to overspend

I also don’t recommend keeping a credit card if it tempts you to overspend. Taking a temporary hit to your credit might be worth it to prevent bigger problems in your financial life.

3. Do cancel credit cards to simplify your financial life

If you’ve missed payments or can’t keep up with transactions because you have too many cards, it might be worth it to strategically cancel one or more credit cards. Keep reading for tips to minimize the potential damage to your credit.

4. Do cancel credit cards with low credit limits first

If you cancel a credit card, choosing one with a higher credit limit poses more of a threat than getting rid of one with a smaller limit. The lower your credit limit on a card, the less closing it could negatively affect your credit.

As I previously mentioned, for optimal credit, it’s best to never carry a balance that exceeds 20% of your available credit limit. If you’re not sure what your credit limits are, you can review them by getting a free copy of your credit report at annualcreditreport.com.

5. Do cancel credit cards you recently opened by mistake

A common credit dilemma is what to do after opening a new credit card that you felt pressured into at a retail store. Sales clerks make getting a huge discount with a new card signup sound too good to pass up. In some cases, you may not even realize that what you’re signing up for is a credit card.

If you’re loyal to a store and make frequent purchases there, having its branded credit card can give you nice savings and promotional benefits that make it worthwhile. While you can’t erase the card from your credit history, if you decide that you’d rather not have the account, closing it sooner rather than later is better for your credit.

Free Resource: Credit Score Survival Kit – a video tutorial, e-book, and audiobook to help build credit fast!

6. Don’t cancel your only credit card

In addition to maintaining low credit utilization, the health of your credit depends on having a mix of credit accounts. That shows you can handle different types of credit, such as installment loans and revolving accounts. But if you cancel your only credit card, that would leave you deficient in the revolving credit category.

It’s better to spread out your balances on multiple cards and maintain low utilization on each of them, rather than have one card that you charge to the limit.

Therefore, I don’t recommend canceling a credit card if it’s your only one. Having at least one card in the mix rounds out your credit file. Ideally, you would have a total of two or three cards that come from different issuers, such as Visa, Mastercard, American Express, or Discover.

If you have more than one line of credit or credit card, most credit scoring models calculate your utilization ratio for each account and collectively on all your accounts. So, it’s better to spread out your balances on multiple cards and maintain low utilization on each of them, rather than have one card that you charge to the limit.  

Depending on the types of charges you make, you may need a low-rate card for times when you must carry a balance and a higher-rate rewards card for charges that you always pay off each month. No annual fee cards are best, but as I previously mentioned, rewards cards that come with a fee may be worth it.

 

7. Don’t cancel credit cards you’ve had for a long time

As if credit utilization and having a mix of credit accounts weren’t enough, a canceled credit card hurts your credit in other ways. Another factor that’s used in calculating credit scores is how long you’ve had credit accounts.

Having a long, rich credit history boosts your scores and makes you appear less risky to potential lenders and merchants. Canceling a long-standing credit card causes your average age of credit history to decrease, which hurts your credit. So, value credit cards that you’ve had for a long time more than those you’ve recently opened.

8. Don’t cancel multiple cards at the same time

If you have more than one credit card that you want to cancel, don’t shut them all down at the exact same time. It’s better to space out cancellations over time, such as one every six months, to minimize the damage to your credit health.

9. Don’t cancel credit cards if you’re planning to make a big purchase

If you’re planning to finance a big purchase, such as a home or vehicle, in the next three to six months, it’s not wise to cancel any credit cards. If your utilization rate increases and your credit scores suddenly take a dive during the application process, you may ruin your chances of getting a low-interest loan.

If you’re planning to finance a big purchase, such as a home or vehicle, in the next three to six months, it’s not wise to cancel any credit cards.

Maria didn't mention if she's looking to use her great credit to borrow money any time soon. But it's an important issue that I recommend she consider.

10. Don’t cancel credit cards because you’ve made late payments

Never cancel a credit card with negative information, such as late payments or being in collections, thinking that it will disappear from your credit file. All credit accounts stay on your credit report for seven years from the date you became delinquent, even after you or a card issuer closes it. Accounts with only positive information remain in your credit file longer, for up to 10 years

What should you do with unused credit cards?

If you or Maria go through these dos and don’ts and decide that it’s better not to cancel a credit card, use it occasionally to make small purchases that you pay off in full. That keeps it active and allows you to continue adding positive information to your credit history.

However, I don’t recommend keeping a credit card that you’re not using responsibly or that tempts you to overspend. Taking a temporary hit to your credit might be worth it to prevent bigger problems in your financial life.

Source: quickanddirtytips.com



Credit Union Vs. Bank Mortgage: Which Should You Choose?

Couple being handed the keys to their new home

You’ve saved up your money, you found the perfect house, and you’re ready to buy. Now you just need a mortgage. Commercial banks may be the obvious choice, but they aren’t the only option for your mortgage. Mortgage brokers, online mortgage lenders, and credit unions also originate mortgage loans.

Credit unions and other non-banks are gaining in popularity for mortgage originations. In fact, credit unions accounted for 9% of all mortgage originations in 2017. If you’re ready to take out a mortgage on your dream home, here’s what we think you should know about credit union vs. bank mortgages.

Find a Mortgage

The Advantages of Getting a Mortgage through a Credit Union

Credit unions operate like banks, but they are non-profit organizations with specific membership requirements. Members of the credit union are the collective owners of the union, offering some distinct advantages for mortgage origination. Credit unions may offer lower rates, easier approval, greater personalization, and more. Here are four advantages of working with a credit union vs. a bank for your mortgage.

Easier Approval

In general, credit unions are more likely to lend to people with poor credit scores and offer options for smaller down payments. Credit unions are also more likely to hold onto the mortgages they originate, rather than selling them like banks often do. When a bank sells a mortgage, outside investors drive the interest rates and underwriting standards, limiting the bank’s flexibility with mortgage terms. When credit unions don’t sell mortgages, they can be more flexible with who they loan to and what rates they offer.

In addition to having more flexible qualification options, credit unions prioritize customer service­—not profits. They want to help their members find the options that work best for them, their community, and the credit union membership as a whole. Plus, if you’re already a member of a credit union, it’s generally easier to get additional services through an institution you already have a relationship with. You may even be pre-approved for a mortgage based on your prior account activity.

Lower Rates

Because credit unions are exempt from paying federal taxes and prioritize breaking even, not making a profit, they can offer higher interest rates for deposits and lower interest rates for loans.

Overall, credit union rates tend to be lower for all loan types, including credit cards, but rates for mortgages may be similar to those from traditional banks if they sell their mortgages. Even a small difference in interest rate can make a big difference over the life of a mortgage, though, so any little bit helps.

Fewer Fees

There are many unavoidable costs of taking out a mortgage: closing costs, vendor fees, insurance. Many banks and mortgage brokers will also charge origination fees and other processing costs. Because credit unions are less concerned with turning a profit, originating a mortgage with one will often result in fewer origination fees and other processing costs. These reduced fees can potentially save you several hundred to several thousand dollars.

More Personalization

Credit unions prioritize customer service for their members. Banks, on the other hand, are primarily motivated by profits. You may get a better, more personalized experience by working with a credit union to originate your mortgage. Because credit unions more often hold on to their mortgages, you’re more likely to work with them for the life of the loan. They also often offer special rewards programs and incentives for first-time home buyers or no-down-payment plans.

Depending on the credit union you’re a part of, it may also be better able to provide specific advice and context for loans. For example, credit unions specifically for veterans may have more hands-on expertise with VA loans. Similarly, geographically based credit unions may have better understanding of local incentives for mortgages.

During times of crisis, like the coronavirus pandemic, credit unions may be more attuned to the needs of their customers and therefore more likely to offer financial hardship support. Reach out to your credit union if you need support or resources.

The Disadvantages of Originating a Mortgage with a Credit Union

Because credit unions are smaller, membership-based organizations, there are some disadvantages to working with one for your mortgage. Here are five things to keep in mind if you’re considering a credit union vs. bank mortgage.

Membership Requirements

While traditional banks open accounts with anyone who qualifies, credit union memberships have additional specific requirements and limitations depending on the union. If you do not meet those requirements, you cannot originate your mortgage with that credit union, even if it would be the best deal for you. You can find credit unions in your area that you may qualify for using CUlookup.com.

Fewer Locations

Credit unions are smaller and often more geographically limited than national banks. That means you’ll have fewer options for in-person service. In fact, credit unions have an average of three branches while most banks have an average of 16. Many credit unions still operate traditional banker’s hours—9 a.m. to 3 p.m., Monday through Friday—as well, limiting your options for service.

Dated Technology

Online services are becoming increasingly important to consumers who require and expect quick and easy self-serve online options. Credit unions are generally behind the times when it comes to technology, which means you may not be able to use an app or find other self-serve options online if you have questions. They are quickly catching up to traditional banks, though, so this may not be much of a disadvantage moving forward.

Limited Financing Options

Banks and credit unions fund mortgages and other loans with cash on hand and borrowed from other institutions. In order to lend more money to members, they must have more money available. Because credit unions typically have a smaller customer base, they tend to have less cash on hand to loan out, which may curtail loans available. Banks are, on average, 13 times larger than credit unions with $2.6 billion in assets vs. $207 million in assets for credit unions.

Insurance

The FDIC does not cover credit unions. Instead, the NCUA regulates federally insured credit unions and provides similar insurance coverage as the FDIC. Some credit unions are state chartered, however, and may be covered by a state agency or offer private insurance coverage instead. Private insurance is held to same regulatory standards but is generally considered less secure than federally chartered coverage. The NCAU Credit Union Locator can verify whether a credit union is federally chartered.

While the type of insurance an institution uses does not directly affect the terms of your mortgage, it should still be part of your consideration process for working with a credit union over a bank.

Credit Union vs. Bank Mortgage

When you’re ready to take out a mortgage, you have a lot of options. Like with other financial decisions, you should shop around across credit unions, banks and other lenders to find the best deal for you. And if you’re not getting the rate you think you deserve, working to improve your credit score is one of the best ways to increase your chances of getting a competitive mortgage rate.

Check your credit report using the free Credit Report Card. You can also find more resources, including a free, no-obligation quote, in our Loan Resource Center.

Sign Up Now

The post Credit Union Vs. Bank Mortgage: Which Should You Choose? appeared first on Credit.com.

Source: credit.com



What is Accidental Death Insurance, and do you Need it?

Accidental death insurance, also known as accidental death and dismemberment insurance, is a type of limited life insurance often acquired for a nominal fee or added to an existing policy. As the name suggests, it releases a benefit if the policyholder dies from an accident or suffers a dismemberment. 

Accidents kill an estimated 160,000 Americans a year and are far more common amongst men aged between 18 and 44. Many of these deaths occur as a result of falls and motor traffic accidents, both of which are covered by most accidental death insurance policies.

When You Don’t Need Accidental Death Insurance

If you already have life insurance, you can probably overlook accidental death insurance. In such cases, it will simply increase the value of the payout when you die, known as “double indemnity” coverage.

Unlike whole-life insurance policies, it does not provide policyholders with a separate investment vehicle that they can cash out at a later date. Generally, accidental death insurance doesn’t offer anything that a traditional life insurance policy can’t provide, and it may therefore be deemed an unnecessary expense.

However, there are exceptions.

When You Need Accidental Death Insurance

An accidental death benefit can’t provide you with anything that you won’t get from a traditional life insurance policy. However, it’s a different story with dismemberment insurance. This will cover you in the event that you lose a finger, toe or arm, which means you’ll have the money you need for medical costs and may be compensated for lost work.

Accidental death insurance can also help to cover any additional medical fees that result from necessary treatment taken after an accident and before death. Your family may be forced to cover these bills, and an additional death benefit can help them with that. 

Accidental death and dismemberment insurance is not something we would recommend in lieu of traditional life insurance, but if you have the option to add it to an existing policy for a few bucks a month, it’s well worth considering.

How Much Does Accidental Death Insurance Cost?

The price of your accidental death insurance premiums will depend on your payout as well as your risk factor. The average person can expect a charge of roughly $5 per month for every $50,000 of coverage, which means a benefit of $100,000 could cost as little as $10 a month.

But, as we have discussed many times before, underwriters focus on probabilities. The more likely you are to die from an accident, the higher those premiums will cost. For instance, if you’re an 18-year-old who has just started driving and enjoys a few high-risk hobbies, you may see those premiums climb.

How Long Does Accidental Death Insurance Last?

Accidental death insurance policies typically run for up to 40 years. You choose the desired term at the start and this is used to calculate your premiums, with longer terms leading to higher prices on account of the increased risk.

What is Not Covered by Accidental Death Insurance?

Accidental death insurance generally doesn’t cover all accidents and all dismemberments. The exact coverage will depend on the policy, and it’s possible to tailor your policy to include some of the things not traditionally included, but this may increase the premiums.

Suicide

Suicide is a tricky one. Many life insurance policies will payout if the policyholder commits suicide, but only if it occurs after the first two years and it is proved that they committed suicide so their loved ones would benefit (although this is not easy to prove).

However, accidental death insurance policies tend to rule suicide out altogether. Many deaths caused by misadventure may be queried as suicide, such as falls and drownings, but unless there is actual proof that they intended to take their life, the death will often be ruled as misadventure, in which case an accidental death insurance policy may payout.

War Injuries

Accidental death insurance rarely pays out for deaths resulting from war injuries. This is true whether the policyholder is shot or dies from an explosion or fall. That death was certainly not intentional, so you could argue that the policy should pay, but most insurers will refuse.

Illness and Disease

An accidental death insurance policy is not designed to payout in the event that you die from an illness or disease. Your beneficiaries may also face some resistance if you had a serious illness or disease at the time of your death but an accident was ultimately the thing that killed you.

For instance, if you have a serious mobility problem and this causes you to fall, hit your head, and die, then technically an accident killed you, but that accident wouldn’t have happened if not for the illness, creating some technicalities that will no doubt lead to problems when filing a claim.

Drugs or Alcohol

An accidental overdose is rarely covered by accidental death insurance. There will be no benefit for your loved ones if it leads to your demise, and no benefit for you if it leads to long-term health complications.

This is not true for all policies, however, and there may be exceptions for drugs that were prescribed.

How Can the Cause of Death be Proved?

As alluded to already, the cause of death isn’t straightforward. With a traditional life insurance policy, if the policyholder dies outside of the contestability period, the insurers will rarely get involved. That changes if they have suspicions about the death and believe that a crime was committed (fraud, murder) but it’s rare.

With accidental death insurance, however, there are many more nuances. As a result, an official investigation may be ordered, and this can include an autopsy.

How Does the Dismemberment Payout Work?

If the policyholder losses an appendage as a result of an accident, they may receive a partial benefit paid direct to them. The policy will dictate how much is paid and why, but generally the payout will be made following a non-excluded accident that results in the loss of:

  • An arm
  • A leg
  • A finger
  • A toe
  • Sight

Higher payouts may also be provided if the policyholder suffers complete paralysis.

What is Accidental Death Insurance, and do you Need it? is a post from Pocket Your Dollars.

Source: pocketyourdollars.com



How Much Life Insurance Do I Really Need?

Since it doesn’t have an immediate benefit – like health or auto insurance – life insurance may be the most underestimated insurance type there is. But if you die, life insurance will likely be the single most important policy type you’ve ever purchased.

And that’s why you have to get it right. Not only do you need a policy, but you need the right amount of coverage. Buying a flat amount of coverage and hoping for the best isn’t a strategy. There are specific numbers that go into determining how much life insurance you need. There are even numbers that can reduce the amount you need.

Calculate what that number is, compare it with any life insurance you currently have, and get busy buying a policy to cover the amount you don’t have. I’ll not only show you how much that is, but also where you can get the lowest cost life insurance possible.

How to Calculate How Much Life Insurance You Need

To make it easier for you to find out how much life insurance you need we’re providing the life insurance calculator below. Just input the information requested, and the calculator will do all the number crunching for you. You’ll know exactly how much coverage you’ll need, which will prepare you for the next step in the process – getting quotes from top life insurance companies.

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Now that you have an idea how much life insurance you need, the next step is to get quotes from top life insurance companies for their best life insurance products. And the best way to get the most coverage for the lowest premium is by getting quotes from several companies. Use the quote tool below from our life insurance partner to get those offers:

What to Consider when Purchasing Life Insurance

To answer the question of how much life insurance do I need, you’ll first need to break down the factors that will give you the magic number. You can use a rule of thumb, like the popularly quoted buy 10 times your annual income, but that’s little more than a rough estimate. If you use that as your guide, you may even end up paying for more coverage than you need, or worse – not have enough insurance.

Let’s take a look at the various components that will give you the right number for your policy.

Your Basic Living Expenses

If you’re not using budget software to track this number, a good strategy is to review and summarize your expenses for the past 12 months.

When you come up with that number, the next step is to multiply it by the number of years you want your life insurance policy to cover.

For example, let’s say your youngest child is five years old and you want to be able to provide for your family for at least 20 years. If the cost of your basic living expenses is $40,000 per year, you’ll need $800,000 over 20 years.

Now if your spouse is also employed, and likely to remain so after your death, you can subtract his or her contribution to your annual expenses.

If your spouse contributes $20,000 per year to your basic living expenses, you can cut the life insurance requirement in half, allowing $400,000 to cover basic living expenses.

But in considering whether or not your spouse will continue to work after your death, you’ll need to evaluate if that’s even possible. For example, if you have young, dependent children, your spouse may need to quit work and take care of them.

Alternatively, if you have a non-working spouse, there’ll be no contribution from his or her income toward basic living expenses.

In either case, your need to cover basic living expenses will go back up to $800,000.

Providing for Your Dependents

It may be tempting to assume your dependents will be provided for out of the insurance amount you determine for basic living expenses. But because children go through different life stages, there may be additional expenses.

The most obvious is providing for college education. With the average cost of in-state college tuition currently running at $9,410 per year, you may want to gross that up to $20,000 to allow for books, fees, room and board and other costs. You can estimate a four-year cost of $80,000 per child. If you have two children, you’ll need to provide $160,000 out of life insurance.

Now it may be possible that one or more of your children may qualify for a scholarship or grant, but that should never be assumed. If anything, college costs will be higher by the time your children are enrolled, and any additional funds you budget for will be quickly used up.

Life insurance is an opportunity to make sure that even if you aren’t around to provide for your children’s education, they won’t need to take on crippling student loan debts to make it happen.

But apart from college, you may also need to provide extra life insurance coverage for childcare. If your spouse does work, and is expected to continue even after your death, care for your children will be necessary.

If childcare in your area costs $12,000 per year per child, and you currently have a nine-year-old and a 10-year-old, you’ll need to cover that cost for a total of five years, assuming childcare is no longer necessary by age 12. That will include three years for your nine-year-old and two years for your 10-year-old. It will require increasing your life insurance policy by $60,000 ($12,000 X five years).

Paying Off Debt

This is the easiest number to calculate since you can just pull the balances from your credit report.

The most obvious debt you’ll want paid off is your mortgage. Since it’s probably the biggest single debt you have, getting it paid off upon your death will go a long way toward making your family’s financial life easier after you’re gone.

You may also consider paying off any car loans you or your spouse have. But you’ll only be paying off those loans that exist at the time of your death. It’s likely your spouse will need a new car loan in a few years. Use your best judgment on this one.

But an even more important loan to pay off is any student loan debt. Though federal student loans will be canceled upon your death, that’s not always true with private student loans. Unless you know for certain that your loan(s) will be canceled, it’s best to make an additional allowance to pay them off.

Credit cards are a difficult loan type to include in a life insurance policy. The reason is because of the revolving nature of credit card debt. If your death is preceded by an extended period of incapacitation your family may turn to credit cards to deal with uncovered medical expenses, income shortfalls, and even stress-related issues. An estimate may be the best you can do here.

Still another important category is business debts, if you have any. Most business debts require a personal guarantee on your part, and would be an obligation of your estate upon your death. If you have this kind of debt, you’ll want to provide for it to be paid off in your policy.

Covering Final Expenses

These are the most basic reasons to have life insurance, but in today’s high cost world, it’s probably one of the smallest components of your policy.

When we think of final expenses, funeral costs quickly come to mind. An average funeral can cost anywhere from $5,000 to $10,000, depending on individual preferences.

But funeral costs are hardly the only costs associated with total final expenses.

We’ve already mentioned uncovered medical costs. If you’re not going to include a provision for these elsewhere in your policy considerations, you’ll need to make a general estimate here. At a minimum, you should assume the full amount of the out-of-pocket costs on your health insurance plan.

But that’s just the starting point. There may be thousands of dollars in uncovered costs, due to special care that may be required if your death is preceded by an extended illness.

A ballpark estimate may be the best you can do.

Possible Reductions in the Amount of Life Insurance You Need

What’s that? Reductions in the amount of life insurance I need? It’s not as out-in-orbit as you may think – even though any life insurance agent worth his or her salt will do their best to ignore this entirely. But if you’re purchasing your own life insurance, you can and should take these into consideration. It’s one of the ways you can avoid buying more life insurance than you actually need.

What are some examples of possible reductions?

Current financial assets.

Let’s say you calculate you’ll need a life insurance policy for $1 million. But you currently have $300,000 in financial assets. Since those assets will be available to help provide for your family, you can deduct them from the amount of life insurance you’ll need.

Your spouse’s income.

We’ve already covered this in calculating your basic living expenses. But if you haven’t, you should still factor it into the equation, at least if your spouse is likely to continue working.

If you need a $1 million life insurance policy, but your spouse will contribute $25,000 per year (for 20 years) toward your basic living expenses, you’ll be able to cut your life insurance need in half.

But be careful here! Your spouse may need to either reduce his or her work schedule, or even quit entirely. Either outcome is a possibility for reasons you might not be able to imagine right now.

What About a Work Related Life Insurance Policy?

While it may be tempting to deduct the anticipated proceeds from a job-related life insurance policy from your personal policy, I urge extreme caution here.

The basic problem is employment related life insurance is not permanent life insurance. Between now and the time of your death, you could change jobs to one that offers a much smaller policy. You might even move into a new occupation that doesn’t provide life insurance at all.

There’s also the possibility your coverage may be terminated because of factors leading up to your death. For example, if you contract a terminal illness you may be forced to leave your job months or even years before your death. If so, you may lose your employer policy with your departure.

My advice is to consider a work policy as a bonus. If it’s there at the time of your death, great – your loved ones will have additional financial resources. But if it isn’t, you’ll be fully prepared with a right-sized private policy.

Example: Your Life Insurance Requirements

Let’s bring all these variables together and work an example that incorporates each factor.

Life insurance needs:

  • Basic living expenses – $40,000 per year for 20 years – $800,000
  • College education – $80,000 X 2 children – $160,000
  • Childcare – for two children for 5 years at $12,000 per year – $60,000
  • Payoff debt – mortgage ($250,000), student loans ($40,000), credit cards ($10,000) – $300,000
  • Final expenses – using a ballpark estimate – $30,000
  • Total gross insurance need – $1,350,000

Reductions in anticipated life insurance needs:

  • Current financial assets – $300,000
  • Spouse’s contribution toward living expenses – $20,000 per year for 20 years – $400,000
  • Total life insurance reductions – $700,000

Based on the above totals, by subtracting $700,000 in life insurance reductions from the gross insurance need of $1,350,000, leaves you with $650,000. At that amount, your family should be adequately provided for upon your death, and the amount you should consider for your life insurance policy.

Once again, if you have life insurance at work, think of it as a bonus only.

The Bottom Line

Once you know how much life insurance you need, it’s time to purchase a policy. Now is the best time to do that. Life insurance becomes more expensive as you get older, and if you develop a serious health condition, it may even be impossible to get. That’s why I have to emphasize that you act now.

Crunch the numbers to find out how much life insurance you need, then get quotes using the quote tool above. The sooner you do, the less expensive your policy will be.

The post How Much Life Insurance Do I Really Need? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com



6 Tips to Find Affordable Health Insurance When You Become Self-Employed

If you're dreaming about leaving a corporate job to work for yourself, getting affordable health insurance is probably one of your top concerns. Fortunately, there are more protections now than ever for those who leave the safety of a group health plan.

This post will cover six tips to find affordable health insurance when you become self-employed or leave a job for any reason, so you and your family get the coverage you need.

Major benefits of the Affordable Care Act (ACA)

The Affordable Care Act (ACA), known as Obamacare, became law in 2010, with significant provisions taking effect in 2014. One critical ACA benefit is that you can't be denied coverage or charged sky-high premiums when you have a preexisting medical condition. However, insurers can charge different rates based on where you live, your age, tobacco use, and family size.

One critical ACA benefit is that you can't be denied coverage or charged sky-high premiums when you have a preexisting medical condition.

The ACA also removes annual and lifetime caps on your health coverage. And no matter how much care you receive, the law caps how much you have to pay for it.

Out-of-pocket annual maximums vary depending on your health plan, but if you get in-network care, you'll never have to pay more than $8,150 as an individual, or $16,300 as a family, for the 2020 plan year. For 2021, these amounts increase to $8,550 and $17,100. Note that these limits don't include your monthly premiums.

What is the Affordable Care Act (ACA) Subsidy?

The ACA also offers many low- and middle-income Americans a health subsidy, which cuts the cost of premiums depending on your income and family size. It's a tax credit paid to your health insurance provider every month, which allows you to pay a lower premium.

For 2020, an individual earning approximately less than $51,000 or a family of four making under $104,000 per year may qualify for an insurance subsidy.

The ACA subsidy applies when your household income is between 100% and 400% of your state's federal poverty level. For 2020, an individual earning approximately less than $51,000 or a family of four making under $104,000 per year may qualify for an insurance subsidy. 

One challenge to using a subsidy is that it's based on your estimated earnings in the year when you'll get coverage, not on your last year's income. Since self-employment incomes can vary dramatically from month to month, the chances of knowing exactly how much you'll earn in the current or future year may be difficult. 

If you underestimate your income for a health subsidy, you may have to return a portion of the tax credit already spent on your insurance during the previous year. In other words, you may owe additional taxes that you weren't expecting.

When you enroll in an ACA plan, you'll have access to a marketplace account. That's where you can update changes to your expected income or family size that affect your tax credit so you can correct it as quickly as possible.

What is the Affordable Care Act (ACA) Mandate?

The ACA mandated that individuals be covered by a qualified health plan or pay a tax penalty if you're uninsured for more than two consecutive months. The mandate applies no matter if you're employed, self-employed, unemployed, a child, an adult, or where you live. 

Technically, it's still illegal to be uninsured, but the federal government won't penalize you for it.

However, starting in 2019, due to the Tax Cuts and Jobs Act, the mandate penalty for not having health insurance no longer applies. Technically, it's still illegal to be uninsured, but the federal government won't penalize you for it. 

But several states have their own insurance mandates, requiring you to have a qualifying health plan. You may have to pay the penalty for being uninsured if you live in:

  • California
  • District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont

For example, California residents without ACA coverage in 2020 face a penalty up to 2.5% of household income, or $696 per adult, and $375.50 per child, whichever is greater. So, even if the federal government won't penalize you for being uninsured, you could have to pay a hefty state penalty, depending on where you live. More states will likely adopt penalties to keep the cost of coverage for residents as low as possible.

The ACA established health insurance exchanges, primarily as online marketplaces, administered by either federal or state governments. That's where individuals, the self-employed, and small businesses can shop and purchase qualified insurance plans and find other options, depending on your income.

How to get affordable health insurance

When you go out on your own, the cost of a health plan can be shocking—especially if you just left a company that paid a big chunk of the insurance bill on your behalf.

Remember that the high cost of health insurance pales when compared to the alternative. Having a medical emergency or being diagnosed with a severe illness that you can't afford to treat could be devastating. 

Remember that the high cost of health insurance pales when compared to the alternative.

Here are six tips for finding affordable health insurance when you become self-employed or no longer have job-based coverage for any reason:

1. Join a spouse or partner's plan

If your spouse or partner has employer-sponsored health insurance, joining their plan could be your most affordable option. Group insurance generally costs much less than individual coverage. Plus, some employers subsidize a portion of your premium as a benefit. 

However, some employer plans may not offer domestic partner benefits to unmarried couples. So, find out from the benefits administrator what's allowed. 

If you're under age 26, another option is to join or remain on a parent's health plan if they're willing to have you. Even if you're married, not living with your parents, and not financially dependent on them, the ACA allows you to get health insurance using a parent's plan. However, once you're over age 26, you'll have to use another option covered here.

2. Enroll in a federal or state marketplace plan

As I mentioned, the ACA established federal and state marketplaces for consumers who don't have access to employer-sponsored health insurance. The following states have health insurance exchanges:

  • California
  • Colorado 
  • Connecticut 
  • District of Columbia
  • Idaho 
  • Maryland 
  • Massachusetts
  • Minnesota
  • Nevada
  • New York 
  • Rhode Island
  • Vermont
  • Washington

No matter where you live, you can begin shopping for an ACA-qualified health plan at healthcare.gov. However, you can only apply for a policy during the annual open enrollment period—November 1 to December 15, for coverage that will begin on January 1 of the following year. Some states with healthcare exchanges have an extended enrollment period

In general, if you miss the enrollment window, you can't get an ACA health plan until the following year unless you qualify for a special enrollment. That allows you to purchase or change coverage any time of the year if you have a major qualifying life event, such as losing insurance at work, getting married or divorced, having a child, or relocating. However, you typically only have 60 days after the event occurs to enroll.

If your income is too high to qualify for a healthcare subsidy, you can still buy health insurance through the federal or your state's exchange. You can also get an ACA-qualified health plan directly from an insurance company, a health insurance agent or broker, or an online insurance aggregator.

3. Consider a high-deductible health plan (HDHP)

One way to reduce the cost of health insurance premiums is to choose a high-deductible health plan (HDHP). You enjoy lower monthly premiums but have higher out-of-pocket costs. If you're in relatively good health, an HDHP can make sense; however, if you get sick, it can end up costing you more. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

Another benefit of having an HDHP is that you qualify for a health savings account (HSA). Contributions to an HSA are tax-deductible and can be withdrawn at any time to pay for qualified medical expenses, such as doctor co-pays, prescription drugs, dental care, chiropractic, prescription eyeglasses, and mental health care. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

4. Get a short-term plan

If you miss the deadline to enroll in an ACA health plan and don't qualify for special enrollment, are you simply out of luck? Fortunately, no. You can purchase a short-term health plan until the next enrollment period comes around.

The problem is, short-term plans don't have to meet ACA standards and only offer temporary coverage, such as for a few months or up to a year. You may be eligible to renew a plan for up to three years in some states, depending on the insurer. 

You won't find short-term plans on the federal or state exchange, and therefore can't get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan.

Short-term plans can charge more if you have preexisting conditions, put caps on benefits, or not cover essential services like prescriptions and preventive care. Because they fall short of ACA requirements, you can have one and still be subject to a state-mandated health penalty. 

You won't find short-term plans on the federal or state exchange, and therefore can't get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan. 

Having short-term coverage is certainly better than being uninsured, but I recommend replacing it with qualified health coverage as soon as possible. That's the best way to have the protection you need against the enormous financial risk of medical costs. 

5. Enroll in Medicaid and CHIP (Children's Health Insurance Program)

If you can't afford health insurance, you may be eligible for free or low-cost coverage through Medicaid or CHIP at any time of year, depending on your income, family size, and the state where you live. In general, if you earn less than the poverty level, which is currently $12,760 for an individual or $26,200 for a family of four, you may qualify for these programs. They may have different names depending on where you live. 

Unlike ACA health plans, state-run health programs don't have set open enrollment periods, so if you qualify, coverage can begin any time of year. 

When you complete an application at the federal or state health insurance exchange, you can also determine if you qualify for coverage through Medicaid and CHIP programs. You can learn more about both programs at medicaid.gov

6. Get COBRA coverage

If you leave a job with group health insurance, you can enroll in COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage. It isn't an insurance company or a health plan, but a regulation that gives you the option to continue your employer-sponsored health insurance after you're no longer employed. 

Instead of having your plan canceled the month you leave a job, you can use COBRA to continue getting the same benefits and choices you had before you left the company. In most cases, you can get COBRA benefits for up to 18 months.

The problem with COBRA coverage is that it's temporary and can be expensive. Unlike other federal benefits, such as the Family and Medical Leave Act (FMLA), employers don't have to pay for COBRA. You typically have to pay the full cost of premiums, plus a 2 percent administrative charge, to the insurer. 

If you're not eligible for regular, federal COBRA, many states offer similar programs, called Mini COBRA. To learn more, check with your state's department of insurance.

Health insurance shopping tips

After you become self-employed and purchase health insurance, it's crucial to shop for plans every open enrollment period. Your or your family's medical needs or income may change.

Additionally, new health insurers come in and go out of the health insurance marketplace. Carriers that offered plans in your ZIP code last year may not be the same set of players this year. In other words, a competitor could offer a similar or better plan than yours, for a lower price. So, if you don't shop annually, you could leave money on the table.

Source: quickanddirtytips.com




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