Lazy Man and Money

Does Long-Term Care Insurance Make Sense?

by 18 Comments

Last week, I mentioned how I spent two days learning about military retirement. The workshop covered a number of topics, but one of them, long-term care insurance, was one that I hadn’t expected. It’s something that I haven’t covered previously on Lazy Man and Money. Truth be told, I knew very little about it.

To educate us on long-term care insurance the workshop brought in a speaker from an outside investment firm, Genworth Financial. However, it wasn’t much of an education like the other parts of the workshop. This speaker couldn’t have made it more of a sales pitch if he tried. He stressed that each of us is going to need some long-term care at some point, almost as if to create some kind of fear. He brought out the stats that the average cost for long-term care now is $82,000 a year and it is expected to double every 14.5 years. He strongly suggested that we get coverage now if you are healthy, because once you have a health condition, or take a prescription of any kind, you might not be able to get coverage – or you might have to pay more for it.

However, as the speaker explained how long-term care worked, it became clear to me that it didn’t seem like a smart financial move. In fact, it seems quite limited. For one example, you don’t buy insurance for the rest of your life – you buy a certain number of years of coverage. After that, that’s the end of your care… you are on your own. Though the average person uses 3 years of long-term care, an Alzheimer might need 7-8 years. Buying 7-8 years of benefit coverage is obviously more expensive than 2-3. How many years of coverage should you buy? There’s no easy way to know.

He also explained that in addition to a set number of years, long-term care plans also have a daily benefit allowance. So you might have purchased $150 a day of coverage for example. If you use only $100 of it a day, you’ll get more years of coverage. If you use $200 though, you’ll burn through your long-term care benefit faster than expected.

This sounds like a specialized annuity. I might be giving it too much credit – a simple savings account seems to do a similar job (provided you plan fair enough in advance as the speaker suggested we do). I pay money in now so that I can get money out at a later time. However with this annuity/savings account, I have to worry about paying more if my health isn’t perfect. Even worse, he said that if the investment company doesn’t manage the annuity/savings account long-term care plan well, there might be increases in premiums that have to be paid in. The speaker used this a reason to go with a company with a proven track record… the sales pitch continued. However, this made me want to consider long-term health insurance even less. Think of all the pension shortfalls. Professionals sometimes don’t plan for the distant future very well. If they make mistakes, I would have to pay more. What if they managed the money well, would they lower premiums? Perhaps I should have asked that one.

The salesman speaker twice mentioned that Long-Term Care is great because you don’t know need to draw down on your other retirement assets like 401k plans, IRAs, etc. I had to stifle a laugh. What are my 401k and IRAs for if they aren’t to provide me with income in time of need? I’m not putting money in them so that my bank’s computer has can get some digital bits to do a little dance.

The bottom line is that we all have a fixed amount of money to prepare for the future. In my opinion, it comes down to a question of whether my money is best invested in a retirement vehicle or a long-term care one. Long-term care plans will vary, but you should be able to figure out the total value by multiplying the daily benefit by the number of years. For example, $150/day for 3 years would be $164,250 of coverage. The salesman didn’t go into what the premiums were for that kind of coverage, but you could take that money put it in your own investments or buy an annuity with it.

If it sounds like you’d be doing better investing it yourself, that seems to be the way to go.

SpringCoin Helps you Budget Away Your Debt?

by 3 Comments

[Update: SpringCoin found a couple of bugs with my account and has fixed them. I’ve getting a much better representation of how it works now.]

Kevin Yu contacted me a couple of weeks ago about a new start-up called SpringCoin. It seems like there is a new financial start-up every 3-4 days in Silicon Valley. The success of Mint selling to Intuit seems to have created a ripple effect. SpringCoin’s niche in the personal finance sector is helping you eliminate your debt.

Taking SpringCoin for a Test Drive

Naturally, I signed up for SpringCoin, so that I write an informed article. The process starts with the typical email/username/password set-up. Then SpringCoin asks for your address, and the last four of Social Security number. I realize that may scare some people off, but this is just so it can it do a soft pull of your credit report (soft pulls won’t impact your credit score). SpringCoin needs this information so it can work its magic.

After I entered in my information, up came three credit cards. Two of them for Chase, which is my credit card company of choice, and one of American Express. Oddly, there are few details surrounding these credit cards. For example the two Chase cards have only the balance and the fact that is is current. I currently have three Chase cards with balances though, so it missed one. Even more odd the balance on the American Express card, which is used only for Costco looks to be off by thousands of dollars. It’s a joint card with my wife, maybe she’s going to surprise me with that Badonkadonk Land Cruiser/Tank I’ve asked for. Let’s move on…

Next SpringCoin asks you for the APR on each of the credit cards. This would require me logging into Chase to compare balances and match up cards. I decided to continue on assuming the “default APR” for two reasons: 1) I’m Lazy 2) More importantly I pay off my credit card debt in full each month so it is irrelevant. Perhaps that “defaults APR” should be labeled something different (average APR) since “default” means something different in the world of credit cards.

The Next step was to connect SpringCoin to my bank. It only required my username and password and none of the enhanced security checks that banks have in place nowadays. It is somewhat concerning that third parties (even companies like SpringCoin) have the ability to retrive my banking information with fewer security checks than I do myself from the bank’s trusted website via a laptop and IP address with a history of years of succesful logins. When I connected my bank to SpringCoin, it didn’t have enough information for SpringCoin to do anything with. It asked me to add another bank, but I simply don’t have another to add. I suspect SpringCoin was looking for a regular income deposit, but as much of my income is business related, I pay myself a salary by transferring different amounts of money at unusual intervals.

This lead to a recommendation of paying $0 a month “based on the income and spending.” This leads to a zero impact on debt. I tried to go on with these numbers, but SpringCoin complained that I wouldn’t make any headway in paying off my debt. So I went back and moved the slider to pay a small amount. At move of one pixel, it jumped up to $7750 a month payment. For me the fine line in paying off the $700 in revolving credit card debt is either $0 a year or $93,000 a year. I could extend the slider to the max, but that would be $30,713 – enough to buy a a pair of 27,000 square foot castles in Newport, Rhode Island. I’ll take my castles, thanks.

SpringCoin
SpringCoin wants to me pay $7500+ a month?


The next step suggest puts me in a position to buy a SpringCoin plan. For most people it is a pay service… but continue reading on, I’ve got a special offer so you can it for free. There is a basic and a premium plan. The basic plan has Personalized Goals, Debt-free Roadmap, Automatic Budgeting, 1-Month Free Trial, and the premium one adds Bill Payment, Negotiation Tools, 24/7 Financial Advice. For me both plans were listed at $0, but that might be because I have the special offer. I couldn’t subscribe to the Premium Plan because the $35/plan wouldn’t help me save with my debt (at least clicking on the “why?” gave me the information that this is usually $35/month).

Another of my concerns is the value of 24/7 Financial Advice. I presume it is this is for the US audience. What kind of financial advisor are waiting for your phone call at 3AM? Do people really have a critical need for financial advice at 3AM? I would have loved to try out this feature, but it wasn’t available to me.

Summing up SpringCoin

My experience is most likely not the norm for SpringCoin. As I have no debt other than a couple of mortgages, I’m not in their target audience. I suspect my outlier financial data caused them some difficulties. Specifically I think I got into a place where SpringCoin couldn’t determine my income and got a division by zero error. That’s my software engineering-speak. (To run with that a little bit, it would be what software-engineers call “garbage in, garbage out.”) SpringCoin is clearly not for personal finance bloggers with little debt other than mortgages.

I’d like to give SpringCoin a grade from A to F, but I think I’m stuck giving them an incomplete. This is where I need your help. It isn’t a match for me, but maybe it is a match for you. SpringCoin’s service usually costs $96 per year, but they’ve offered to give Lazy Man and Money readers a 100% free lifetime membership if you sign up now using this link before April 30th. I’m a big fan of lifetime memberships, but to take advantage you need to hurry… the offer is limited to the first 300 who sign up.

So give it a go and let me know if the comments if SpringCoin is helpful to you.

Palmer’s Planners: Finances Made Simple

by 7 Comments

Plalmer's Money Planner
Plalmer's Money Planner
Today is a day that I thought I’d never thought I’d see. I’m linking to Etsy.com – a site known for it’s many knick-knacks. I’ve always viewed it as a way to spend money on stuff that I wouldn’t use. For example, as I write this article, this apple cozy is being highlighted on the Etsy home page. I’m may be a grade-A jerk but I don’t feel that my apples need to be kept cozy. I’m sorry if I insulted any apple lovers out there, but that’s just the way it is. Take the money you’d spend on comforting your fruit and put it towards retirement.

Sorry I got a little carried away there. This article isn’t supposed to be about apple cozies. Instead I want to introduce you to Palmer’s Planners – a set of financial planners from Kimberly Palmer, senior editor for U.S. News and World Report’s Alpha Consumer. If you’ve read my review of her book, Generation Earn, you know that I’m a big fan. She comes from a prospective that is more like a blogger than a financial guru – that scores huge points with me. If you aren’t sure about the difference, watch an episode of the Suze Orman show. I find that show entertaining as well, but you don’t get to know the person, and that was one part of Palmer’s book that I really enjoyed.

Palmer’s Planners is a set of financial planners covering topics such as general money planning, getting out of debt, and preparing for a baby. I had a chance to look at a few, and here are couple of thoughts on a few of the products:

  • The Money Planner – While all the planners work to supplement the aforementioned Generation Earn book, this is probably the best example of it. It doesn’t go into great depth in any one area of personal finance, but it hits the important parts of many different areas. For example there are a couple of pages on debt in this planner, but the Debt-Free Planner is completely dedicated to the topic. The advantage to this is high-level approach that you don’t get bogged down in any particular area of personal finance. You can find your weaknesses and then focus on them later.
  • 2012 Money Planner – The 2012 Money Planner takes a calendar-based approach to your finances. For example, March is mostly about preparing your taxes while August is about going back to school. There are a few quarterly checklists and a year-end review also included.
  • Baby Planner – I think saved the best for last. The spiral bound baby planner looks like the perfect gift for an expecting mother. What I especially like about it is that you can give it without looking like an uppity jerk. What do I mean by that? Well if you have a friend who might be in a tough financial spot giving a money planner to someone might come off as rude, but if the person were expecting a baby, the baby planner is a socially acceptable gift. The person might like the planner so much that they pick up the other money planners. (Note: There is a PDF version of this available as well if you just want the information without the pretty packaging.)

Finally, you can get The Money Planner, the 2012 Money Planner, and the Debt-Free planner, by getting the Complete Money Planner Kit. One note of caution… take note what you are ordering, because with “Money Planner” being the most prominent term in the title in three of the products, it can get somewhat confusing.

One thing that I like is that all the planners come in PDF form, so there is no waiting. You can print them… or you can read them on your computer or tablet. In my house, they’ll make their way to our $99 TouchPads quite quickly. The other thing that stands out is the artwork. While I’m the kind of person who just loves text (note the lack of images on most of my posts), the illustrations would likely appeal to my wife. That’s not to be overlooked. While I’m a personal finance nerd, I recognize that not everyone is and every little bit helps.

Personally, I’m going to give the 2012 Money Planner a spin next year. I’ll read through the Money Planner, but I think that it would be a case where, as a personal finance blogger, I do much of what is recommended in there anyway.

P.S. That lead-in paragraph was a half-lie. I have been secreting searching for a way to link to this outstanding Jayne Cobb hat for awhile now. I was serious about the apple cozy though. I can’t believe people would pay $17.50 for such nonsense.

Reviewing My Necessary Expenses (October 2011)

by 17 Comments

In the past, I used to go through and publicly list my necessary expenses. These are expenses that I consider necessary. There likely is a debate to be had about what qualifies as necessary, but for the most part, I’m including things that are necessary for living and/or protecting my income. This means that an internet connection for me is necessary. However, a Netflix subscription is not.

One thing to note is that these expenses represent my portion of what we pay per month. In cases of shared expenses like rent, groceries, and utilities, that’s half of what both me and my wife use. Why half? The idea is to come up with a number for my expenses and use this to compare to my income. My wife has an income as well. I’m not at liberty to discuss that income. Due to that, isolating the example to myself helps illustrate the value of calculating necessary expenses. So as you read this, pay note that your families costs may be double or more (especially if you have children).

  • Housing: $1500 – Our rent is nearly $3000 a month. Silicon Valley is very expensive, but my wife’s salary is adjusted for that expense. If it weren’t, we wouldn’t be here.
  • Transportation: $200 – I pay around $76.41 a month for insurance. Since I work from home, I drive very little, usually just to the dog park about 3 miles away and back. At 6 miles a day, I can get nearly a month on 1 tank of gas, which costs me about $50 (California gas is expensive). My 2001 car has been paid off for 7 years now, so there’s no cost there. What’s the other $75 for? Let’s call it sundry expenses: when I need to drive more, when I need car maintenance, when I take public transportation, etc.Since this is for my car and my wife has her own car this is a personal expense for me and is not divided like some of the other costs.
  • Groceries: $150 – I had previous had this as $50 for the month back in 2007. At the time, my work was providing me lunch and dinner most of the time. Now that I work from home, I lose that perk. In addition we’ve added on more hungry mouth feed – our 75 pound Huskador (husky – labrador mix).
  • Internet: $25 – This is simply half of our Comcast bill for the Internet. It is somewhat of an estimation because without cable television it might be more expensive (it wouldn’t be part of a package)
  • Gas and Electricity: $75 – In Northern California we use a lot less gas and electricity than we did in Boston. That’s what happens when you don’t need AC and only need heat about 3 months of the year. Though this cost varies, the $75 is probably as good an estimaion as any.
  • Water: $20 – This is a pure guess. My wife actually pays the water bill and she’s not available to ask at the time of this posting.
  • Cell Phone: $25 – I’m on a grand-fathered Virgin Mobile plan that costs me just $25 for 300 minutes, unlimited data, and text. Since this is my phone and my wife has her own phone this is a personal expense for me and is not divided like some of the other costs.
  • Home Phone: $3 – I picked up free lifetime Ooma service for $150. What’s the $3 a month for. There’s still some taxes that are necessary (911 service for example). I didn’t even bother dividing this half to represent my half of the taxes.
  • Property Insurance: $30 – This is just my half of the property insurance. It’s possible that we could potentially save some money on this expense. It’s time to look into what coverage we have here.
  • Dog Care: $50 – Once again, I’m doing a little guessing. I’ve included his food in the groceries. This would cover vet visits, heart worm pills, flea medication, etc.

You’ll notice more than a few things are estimates. For me, that’s good enough, because in general they are fairly close. It establishes a benchmark for comparison. For example one were to do these expenses a decade ago, they might find that their home phone bill was $45 a month. Some people doing this now will have a cell phone bill over $100.

Some ask why one would want to review their necessary expenses. I have three reasons:

  • Keep lifestyle inflation in check – There is a temptation to spend more money when you make more money. I don’t want to be caught up in that. I want to keep my necessary expenses down even if it means making some compromises on my cell phone selection.
  • Gives me a view into how close I am to financial freedom – This blog currently makes more than all these expenses put together. What this means is that in some ways I have a sense of financial freedom by being my own employee – as long as business continues to stay the course. That’s always a question mark.
  • Prepare for disaster – Most people say that they want to have a 6 month emergency fund, but it’s hard to know how much money that is without knowing what your necessary expenses are. This gives me a very good figure to go on for that.

Final thoughts: When you add it up, I have about $2,078 in necessary expenses each month. The biggest one by far is the rent. I’m sure that’s true of many people. It’s a particularly high number for us, but our plan is to move to an area of lower cost living which would likely reduce the number significantly.

Plan Ahead to Take Advantage of a Recession

by 3 Comments

I’m taking a little trip this week. I’m not that far from home, just a hundred miles north of Silicon Valley where I usually live. It puts me in smack dab in the middle of Sonoma Wine Country, the hidden gem that gets overlooked due the popularity of nearby Napa. The place I’m staying at is beautiful, with a heated pool and a brand-new gym. The view of the wine producing vineyards is amazing. It is 80 degrees without a cloud in the sky. Why am I taunting you? The hotel room that I’m in is only $120 a night… and the place is empty.

I can only come up with one explanation… the poor economy. In an economy such as this one, I can’t imagine too many people are traveling a thousand miles to drink some wine. I’m kind of disappointed because I could use a little more pool conversation. (On the other hand, it is nice to have the gym to myself.)

Of course hotels aren’t alone in offering deals. You can find deals on all sorts of industries that cater to those with disposable income when times are good. Reminds me how not to long again, every restaurant wanted to save me money as they lured me in with deal after deal. Were they really saving me money? Not really – I could have saved a lot more by cooking for myself. However, they provided with a lot more value than usual.

What’s the lesson to be learned? I look at it and think that you should apply the theory of dollar cost averaging to your life. When the economy is good take advantage by socking away some of that extra money. I know it’s tempting to pour it into the stock market to make even more gains, but I think the rewards are better if you wait for a time when prices are low. You’ll find that your dollar goes a lot further then – just like how you get more stock for your money when investing in a down market.

Bonus Limited Time Deal: I know this isn’t related to the article, but today LivingSocial is selling a $20 gift card to Whole Foods for $10. I know that Whole Foods is expensive, but it’s a pretty high quality. The 50% savings probably puts many of their products in the same budget as your local bargain grocery store.