July 2008 Edition

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eFinPLAN.com Taking the Mystery Out of Financial Planning Newsletter

Our goal is to demystify financial planning by providing common sense usable information and easy-to-use financial planning software 

This Issue…

•Home Budgeting Economics

  - Eleven Financial Tips for people with Chronic Health Conditions 

  - From the Blog World: Ideas from other Web sites

•Financial Planning

  - Investing in a Bear Market 

  -The eFinPLAN Way: Do-it-Yourself, NOT Do-it-by-Yourself  

Home Budgeting Economics

Eleven Financial Tips for people with Chronic Health Conditions

By Laura Irwin, eFinPLAN co-founder

In 1989 and 1991 we had our two babies at a cost of $10 each. We made a $10 co-pay at the first pre-natal visit, and all expenses including birth up through the baby’s 3-month checkups were covered by that first co-pay. Few people, perhaps other than Senators, receive health care today at such a low cost. Eleven years ago I was diagnosed with a chronic illness. Since then we have gleaned first-hand knowledge of how ongoing prescriptions and procedures can put a huge dent into a budget. Healthcare for all Americans is increasing at a much faster pace than incomes. If you or someone you love has dealt with a chronic illness, inadequate health insurance, or a costly procedure, the following tips may be helpful in lowering or at least taking control of medical expenses.

1. Learn all you can about your health insurance and do your research before your annual open enrollment. Compare costs, premiums, deductibles, maximum out-of-pocket expenses, prescription coverage, co-pays, and ‘in-network’ doctors (ask your doctor – do not rely on the insurance Web site or booklet). If you are married, compare all costs with your spouse’s plan. If you have a Human Resources department, make an appointment if you need help, and take a list of medical expenses from the previous year so that you can make an educated guess of the best coverage for your needs. 

2. If you have a high deductible policy, get a Health Savings Account (HSA) and contribute to it religiously. You may also weigh the benefits of a Flexible Spending Account (FSA) if available. Remember that most FSA’s do not roll over to the next year, so any unused money is lost. Most small businesses cannot afford to offer premium health insurance anymore and many have gone to higher deductible insurance. Single men benefit the most from these policies. When an employer changes to a high-deductible plan, it costs on average $1000/year more for women than for men because of mammograms, the cervical-cancer vaccine, Pap tests, birth control, and pregnancy-related services. Women also generally go to the doctor more regularly for preventive care. 

3. Contribute extra to your Health Savings Account if you feel that your employment situation is precarious. Because health insurance is attached to employment, premium payments must be made after a job loss or the health insurance will be cancelled. ‘COBRA’ and ‘insurance continuation’ are great insurance bridges between jobs, but coverage is not inexpensive. You can get the employer’s actual monthly contribution amount from the Human Resources department and plan to save more in your HSA in case you lose your job. 

4. Keep track of your medical expenses – they may be deductible. ‘You may deduct only the amount of your medical and dental expenses that are more than 7.5% of your adjusted gross income’ (see irs.gov publication 502). Also keep a record of mileage for medical reasons, and of health items you buy at the drug store. 

5. Organize your medical bills into a folder by the ‘Date of Service’, which is the date you received medical treatment. This is unnecessary for regular checkups, but procedures or injuries are billed with this Date of Service as a reference, and keeping them organized will help. For a 5-day hospital stay a few years ago, we accumulated a 1-inch thick folder of bills from seemingly every department in the entire hospital except possibly the janitorial staff. 

6. Investigate quicken.intuit.com/healthcare for complex medical billing to manage multiple insurance plans, Medicare, disputes, and payments. It has an appointment reminder, and it can also show you whether you have paid your bill, met deductibles, or qualified for a tax deduction. This might be ideal if you or someone in your family has a large stack of medical bills or perhaps manages parent’s health care. 

7. Shop around for prescriptions. There are several ways to lower prescription prices, including 90-day mail orders, pill splitting, and $4 generics from several retailers. Spend some time calling around to several pharmacies to get their lowest prices, and carefully compare online pharmacies. Some pharmacies, such as Costco, offer a discount for those without prescription coverage. If your doctor is prescribing a new medicine, ask for a sample so that you do not have the expense of unused medicine if you become allergic. Also, discuss your financial concerns with your doctor and pharmacist because they can sometimes prescribe a less expensive alternative or perhaps an over-the-counter replacement. For example, we recently saved $40 by buying an over-the-counter drug instead of the prescription. In addition, prescription Claritin used to cost our family $70/month. The generic is still more than $1/pill or $30/month. At wholesale clubs the generic is approximately $30/year. Of course, you should not change any medicines or use over-the-counter medicines without talking with your doctor first. 

8. Get serious about budgeting. Keep track of your expected medical expenses and make all your budgeting and savings plans accordingly. For example, if you know your ongoing prescription costs will be $150/month, enter that amount into your budget, and find ways to save in other categories. If you have a large bill, ask to pay the bill over time in smaller payments and make sure that you adjust your budget accordingly. 

9. If you are in financial distress and cannot afford your medicine, you might try The Partnership for Prescription Assistance at pparx.org  or rxassist.org to see if you qualify for assistance. You may also speak to your doctor and get the pharmacy representative’s contact information to see if the pharmacy has any programs that may help. 

10. Live as healthfully as possible. Research indicates that lifestyle (e.g., stress, weight, smoking and drugs/alcohol abuse) are the chief causes or contributors to illness today. This recommendation bothers me a little because I didn’t do anything to cause my illness. However, we should all try to do whatever is in our control to stay healthy.

11. Most importantly, Glean all the lessons learned from an illness, such as increased compassion, identifying and prioritizing the most important things in life, and discovering unconditional love from family and friends. 

Make sure that your overall medical expenses are reflected in your financial plan, such as eFinPLAN.com. Dealing with an illness or injury is difficult enough without the addition of financial worries, but with organization techniques, education about insurance and prescription options, and diligent savings for health expenses, it need not cause you headaches too.

Home Budget Economics

From the Blog World

Ideas from other Web sites

At eFinPLAN.com you will see on the right side “News Feeds”. These are interesting financial articles and blogs from around the Web that I think are useful, some I have written, most not. Go to the eFinPLAN Blogroll.

There you will find

• George Carlin Tribute – Finance Jokes

• Having a Pool: Limiting Your Liability

• Win a free year of eFinPLAN

• Becoming a tree

• Sometimes You Win, Sometimes You Forget to Check the Fine Print

Financial Planning

Investing

The most difficult time for investors is during a ‘bear’ market. A ‘bear’ market means the market is going down more than it is going up, connoted by the bear clawing in a downward motion, as opposed to the bull plunging his horns up in an upward bull market.

Everyone gets nervous in a bear market, because they see the value of their stock portfolios going down. So they wonder if they should move their money out of the market. This is called market timing. Market timing is a difficult thing to do, because you have to know when to get out of one category of investments and into the other (stocks, bonds, and cash equivalents, typically). Or it may mean getting out of a typical sector of stocks, such as ‘transportation’ stocks. The only way to truly know when it is best to get out or in is to have a really good crystal ball or have a team of investment managers. In addition, just because a market is down doesn’t mean someone should divest themselves, because in a bear market you are able to buy stocks at a bargain, so when the market goes back up (it has for a 100 years) what you bought as a bargain has the potential for great appreciation.

A team of investment managers is not just for the very rich, if you have enough money to invest in mutual funds, mutual fund companies employ large teams of investment professionals and they hire additional teams called sub advisors to help them out. These are active fund managers that are not only looking for the right stocks to buy, but also at economic factors.

Index funds are all the rage today, because everyone knows most mutual funds don’t do better than index funds. I’ve heard that only 10% of mutual funds beat their respective index consistently. Considering there are more than 10,000 mutual funds, if you search hard enough or hire a planner that is really good at doing fund research (and there are many), then you can find some pretty good ones. With index funds you are restricted from buying anything besides the set list of stocks, but mutual funds have an advantage because economic forces can be considered for stock purchases. That is why you want to look for fund managers that perform better than the index in a bear market too. Now past performance is no indication of the future, but decision making in light of historical information was always part of wise decision making.

Following an asset allocation mix of stocks, bonds and cash equivalents will usually help your portfolio weather market fluctuations; when one category is not performing well, usually one of the others is doing better.

During market fluctuations, good or bad, don’t make emotional decisions. Monitor your investments, make sure that not one category gets too far out of balance, and get information from your investment provider on a regular basis.

If you are within 5 years of retirement or are retired, you want to spend extra attention to your investments, and employ an excellent financial planner or investment person. You are in a critical period, and you don’t want bad decisions to put you in a situation that causes you to have to work longer.

I recommend that you avoid paying too great attention to Jim Cramer’s Mad Money on CNBC. Jim Cramer may have good information from time to time, but I have seen him flip-flop too many times, and, depending upon the blogs you read, his accuracy ranges from 30% to 50%. If you want to see clips of his flip-flops, go to youtube.com and search Cramer flip-flop. It is interesting to see how quickly he changes his mind at times. Shows like Mad Money and some of the daytime market watch programs on CNBC can be very informative, however they often have too much hype and not enough balance.

Financial Planning

The eFinPLAN Way: Do-it-Yourself, NOT Do-it-by-Yourself

eFinPLAN is an innovative way to help people do a lot of their own financial planning. Going through the process this way helps you in many ways. First of all it helps you get organized, because you have to find your information to enter it correctly. Entering the information into the questionnaire is educational. While filling in the blanks and looking at your records, you discover things about your financial situation and finances in general. If you run the report and go back and change the parameters (in the main input screens or in the ‘What-if’ section), such as the amount contributed to retirement accounts, when you re-run it you can quickly see the result of changes.

Do-it-yourself financial planning is not do-it-by-yourself financial planning. Do-it-yourself means to take personal accountability and control for your finances. eFinPLAN helps you do that by helping you to plan and learn on your own. eFinPLAN users know they need help from professional advisors such as investment, insurance, tax and legal people. In fact, the eFinPLAN report helps you figure out which advisors you need assistance from.

When you meet with them to help you implement your plan, you will understand your financial situation, terminology and needs much better. This may save you time and money since you have prepared in advance. Many people tell me that they are no longer intimidated by financial people. In addition, good financial planners prefer to work with clients that are taking control of their situation and are more informed. Planning is team work between you and your advisors, where everyone is engaged, not just you standing on the sidelines passively taking instructions. This also frees up the planner’s time to focus on your investments.

Every day, financial planners are discovering eFinPLAN: some are referring clients to eFinPLAN for these very reasons. We have a growing list of financial planners that are becoming familiar with and becoming eFinPLAN fans. If you are a planner and would like to explore eFinPLAN options for you, click here, or contact us. In addition, eFinPLAN users sometimes contact us for implementation assistance; since we don’t give advice, we can refer them to you. 

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About the Authors

Kent E. Irwin is CEO and co-founder of eFinplan, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at kirwin@efinplan.com. Laura D. Irwin is CFO and co-founder of eFinPLAN, LLC. She can be reached at lirwin@efinplan.com.

eFinPLAN reports, newsletters and Web site are designed to increase your knowledge of financial matters and permit you to take greater control of your financial future. The resources provided are to assist you as you advance up the financial learning curve. No single company or person has all the financial knowledge you need or can address everyone’s individual situation and show all possible solutions. Therefore, we encourage you to utilize other resources, and when appropriate, rely upon trusted professional advisors. This is not intended to, and does not, provide specific legal, tax, accounting, insurance, and investment, financial or other professional advice. eFinPLAN is not your financial planner or investment advisor. For specific advice on these aspects of your overall financial plan we encourage utilizing trusted professional advisors. This is not an advertisement or solicitation for any specific investment or investment strategy. Information contained herein is not a substitute for consultation with a competent legal professional or tax advisor and should only be used in conjunction with professional advice.

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