According to the U.S. Department of Agriculture (USDA), raising a child to the age of 18 sets families back an average of $233,610, and thatâs for each child. This figure doesnât even include the cost of college, which is growing faster than inflation. CollegeBoard data found that for the 2019-2020 school year, the average in-state, […]
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Are you in the market for a new or new-to-you car? If so, you’ve probably wondered “How much car can I afford?”
While your local car dealership might be happy to tell you the sky’s the limit regarding your car purchase, your personal budget might be telling you a different story. Spending more than you can afford on a car turns that car from a blessing into a burden.
Deciding how much to spend on a car starts with knowing your current financial numbers. You'll need to know your current income, expenses, and savings amounts.
There are several financial factors that can influence how much you should spend on a car. The amount of money you earn, of course, needs to be taken into account.
When determining how much you earn, always use your net take-home pay to start with. From there, factor in the other financial obligations you have.
In other words, look at your budget. If you don’t normally use one, now is a good time to start. Having a clear view of all other monthly financial obligations will help you better determine how much you can afford.
The 50-30-20 budget plan can be helpful. In short, the 50-30-20 budget plan works like this:
There are many ways to design a budget, but the 50-30-20 budget gives you a good place to start. It will certainly point out of there are any areas that are totally out of whack.
Having a healthy savings account balance is important when making a car purchase as well. If you don’t have an emergency fund with a balance equal to three to six months’ worth of expenses, building that emergency fund up should be a priority.
If you don’t have an emergency fund with a balance equal to three to six months’ worth of expenses, building that emergency fund up should be a priority.
With an added car payment, having a plush savings balance will help you ensure you can cover the new payment even if you hit a financial bump. Or, for instance, if the car needs repairs.
Once you have looked at your budget and determined the amount of money per month you are comfortable spending on a car you'll want to be clear on the total car costs before you make your purchase. Affording a new car isn’t simply about the payment.
There are several other costs associated with car ownership, such as:
You can call your insurance company ahead of time and get a quote for the new vehicle you're considering. If you are still trying to narrow down what type of car you want, check out this list of the most and the least expensive cars to insure.
Call your insurance company ahead of time and get a quote for the new vehicle you're considering.
Fuel costs are fairly easy to determine. A Google search will give you the MPGs of any car you could think of. Compare that to your current car to see if your costs will change.
Maintenance and repair costs can be harder to determine but you can get an idea by using averages across a brand. Here's an article from Autowise that displays the cheapest and most expensive cars to maintain.
Be sure to factor in an accurate estimate of these additional car ownership costs as you determine a purchase price and payment amount you’re comfortable with.
Doing your due diligence as you shop for a car loan is important as well. You do not have to get financing through the dealership. You will likely do better getting a loan yourself through your bank. At the very least, have an understanding of what rate you would qualify for before heading into the dealership so you know if they are offering you a fair rate.
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After months of searching, planning and saving, youâre finally ready to apply for a mortgage. You think you have all your ducks in a rowâyou have great credit and a killer history of making your loan payments on time. But thereâs one small hiccup. A lender noticed that youâve had a recent, slightly unusual cash… Read More
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Your guide to understanding how a Fed rate cut could impact your mortgage as a homeowner or prospective buyer.*
The post What Happens to Mortgage Rates When the Fed Cuts Rates? appeared first on Discover Bank – Banking Topics Blog.
Using Wade Pfau’s data and “predictions” of the future, we’re creating an updated Trinity Study to use for our retirement planning.
The best money market mutual funds are a good place to keep your cash while earning interest. Bank checking and savings accounts and money market accounts are good alternatives for your cash. But money market funds offer a higher rate of return than these other short-term investments. One of the best money market mutual funds is …
Continue reading “The Best Money Market Mutual Funds To Consider”
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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.
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.
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.
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:
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.
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:
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.
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:
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.
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!
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.
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.
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.
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.
A 55-year-old can expect to pay a long-term care insurance premium of $2,050 per year on average, according to a 2019 price index survey of leading insurers conducted by the American Association for Long-Term Care Insurance (AALTC). That will cover … Continue reading →
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TurboTax now offers live professional help, audit support, and even the ability to input your info by taking a photo of your W-2. But is it right for you? Our TurboTax review will help you decide.
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