How Financially Literate Are You? 3 Things You Should Know About Your Money

Most of us received little guidance or instruction on how to handle money when we were growing up. That’s OK — we can learn now, a little bit at a time. Let’s start with the basics.

How do most of us learn how to use our money wisely and well? When we’re growing up, we’re given special instruction in important subjects — swimming, driving, sex — to arm us with info and keep us from harm.

Yet when it comes to managing our money — an activity that every one of us needs to do, every day — we receive surprisingly little preparation. We’re not taught much about it in school, because education systems leave it to us to learn from our families and friends. However, those people often don’t fill in the gaps because money can be such a loaded or taboo topic.

Natalie Torres-Haddad, who grew up in southern California, saw many people around her struggling with debt and financial instability. She was determined to be the exception, and she purchased her first rental property in her early 20s and earned an MPA in Finance & International Business. In the process, however, she became buried in debt. Only by teaching herself the basics of money — basics that she’d never learned — was she able to steady herself and her finances.

Today she leads workshops and sessions to prevent others from falling into the money pit. (She’s also the author of the self-published Financially Savvy in 20 Minutes ). She’s found that even among the college-educated people she meets, “the majority feel confused and overwhelmed about balancing their income and expenses,” she says. The stats show they’re not alone. A 2015 Ohio State University study reported nearly 70 percent of college graduates in the US say they don’t feel equipped to manage money and deal with their debt.

Not only must we get up to speed on the basics, we also need to start having honest conversations with each other about money, says Torres-Haddad. In the same way we’d tell family and friends that we’re cutting out refined sugar from our diets or practicing yoga to increase our flexibility, we should be open with them about the steps we’re taking to boost our financial health. That way, we can get advice and support. This transparency, she adds, can also make us less susceptible to peer pressure-related spending. How many of us have agreed to a pricey meal or weekend trip because we didn’t want to come clean about our money concerns?

Becoming financially literate does not require a huge time investment. Torres-Haddad believes we can start by dedicating 15 – 20 minutes a day to developing our skills and knowledge by learning new terms and resources. Just like attaining literacy in a foreign language, she says, “it’s an ongoing education.” Here are three things you need to know about your money.

1. Know How Much Money You’re Bringing in Every Month vs. How Much You’re Spending

Most of us can rattle off our salaries in our sleep, but could you do the same for your monthly after-tax income and where you’re spending your money every month? If you can’t, that’s normal. But now is the time to learn your actual take-home pay and your actual expenses (and not just ballpark figures or estimates).

For your income, look at your physical or online pay stubs, and start keeping a record of the after-tax amounts. If you’re a salaried employee, that number should be fairly steady; if you’re not, those numbers will vary.

For your monthly expenses, Torres-Haddad suggests writing down — whether it’s in a physical or online notebook — every single daily purchase (coffee, take-out, Uber, online shopping, etc) you make and every single ongoing payment you make through autopay or credit cards (Netflix, gym membership, car insurance, utilities, etc.).

If you’ve never done this before, you may find this uncomfortable — even painful — but it will force you to face up to your spending habits. It will also make these purchases visible. Often, our regular outlays (such as Netflix, Hulu, etc.) can go unnoticed or unquestioned, and our daily spends — especially if we pay by debit card so the funds are instantly drawn from our bank accounts — can go forgotten. Torres-Haddad calls the latter “runaway spending” — “when the little things that you thought cost only a few dollars actually cost much more” in the long run. Take a daily $5 green smoothie. By making them at home, you could save yourself a few hundred dollars in a month.

After you have a fundamental understanding of income and expenses, you can download an app to help you track these categories; see your bank account, credit-card and loan balances; and organize your purchases into buckets so you can identify areas where you might cut back. Two free apps to try are Mint or Charlie, says Torres-Haddad. But, she cautions, apps can be a little “out of sight, out of mind,” meaning if you need extra help to be aware of your spending, stick with the pen-and-pad (or fingers-and-keyboard) method a while longer.

2. Know Your FICO Score and Your Other Credit Scores

While you don’t need to have a good credit score to be financially literate, you must know what it is. ( Note: Most of the information in this section applies to people living in the US.) In the US, FICO was the first company to offer a three-digit credit-risk score for lenders to use when deciding whether or not to approve a loan or line of credit, a credit limit, and an interest rate. There are three other national credit reporting bureaus — Experian, Equifax and Transunion — which also keep track of all your loans (student, auto, personal, etc.) and your balances and histories for all your credit cards (whether issued by banks, stores or businesses).

However, the FICO score is the one most frequently used when you apply for credit cards, mortgages and most types of loans; rent an apartment; or sign up for utilities. FICO scores range from 300 to 850; 670 and up is seen as a good score and 800 and up is excellent. While the FICO score is calculated with a proprietary algorithm, the primary factors that go into it are your repayment history (do you pay your credit-card bills on time? how late are you?), how much debt you’re carrying on cards and loans, how long you’ve successfully held a credit card or loan for; and whether you’ve managed to hold a mix of different kinds of credit.

Most banks and credit cards offer free access to your FICO score on their mobile apps and websites ( here’s a list of the ones that do). If you don’t use one of these companies, you can also find out how to access your score on FICO’s helpful FAQ, including a chart showing where your score falls between “Poor” and “Exceptional.”

Besides checking your FICO score every year, do an annual check of the reports issued by Experian, Equifax and Transunion. This is so you can verify that they’re correct, make sure no one has opened up a line of credit in your name, and see where you might improve. You are entitled to a free copy of a credit report from each bureau once a year. Beware: Many sites will charge you a fee, so use the federally approved and secure Annual Credit Report site.

If it’s your first time checking or you’re about to make a big purchase (such as a car or a home), Torres-Haddad suggests getting all three reports at once. After that, she recommends spacing them out throughout the year. That way, you can quickly catch any errors, fraud, identity theft or any other actions that could hurt your credit history. Mark your calendar so you know when you can request your next free credit report.

3. Know How Much Credit Card Debt You’re Carrying

Knowing how much credit-card debt you’re carrying — and how quickly it’s increasing due to interest — is critical to your financial literacy. Make a list (on paper or on a computer) of each of your credit cards, their current balances, and their current interest rate. Then, put them in order from highest interest rate to lowest.

In general, says Torres-Haddad, this should be how you should prioritize paying them off, paying as much as you can towards the card with the highest interest rate while paying the minimum on the other cards. Called the “ debt-snowball method,” this was popularized by money expert Dave Ramsey.

If you have any cards that offered a 0% APR as a promotion when you signed up, mark down the date on which the promotional rate expires because that’s when you can expect your debt to accumulate at a high interest rate (20% or more). Try to budget your monthly payments so that this card will have little to no balance when that expiration date arrives.

Believe it or not, having a credit card can be a great thing for a person’s FICO and credit scores — if you use it responsibly. Of course, carrying no debt on your cards is best. Otherwise, Torres-Haddad recommends using no more than 30 percent of your available credit limit. So if you have two credit cards with limits of $6K apiece, totalling $12K in available credit, make sure the total balances you’re carrying do not exceed $4K.

If you’ve managed to pay off a credit card, congratulations. But while you may be tempted to close it, Torres-Haddad advises against it. Why? Closing the account will shrink your total amount of available credit and cause your credit score to dip. Instead, delete the card number from any online shopping accounts, cancel any auto-pays billed to it, and freeze the card in ice. It may sound silly but it means that if you want to use it, you’ll be forced to wait for it to defrost — and forced to take a little time to think about your purchase.

When choosing a new credit card, look for ones that offer incentives — such as travel points or cash back — which could help you and your finances. Torres-Haddad recommends going to nerdwallet.com and bankrate.com to compare credit card offers.

Obviously, these three points represent just a small part of financial literacy. That’s why Torres-Haddad urges people to be patient and to learn gradually. Two books she recommends are Napoleon Hill’s Think and Grow Rich!  and Robert T. Kiyosaki’s Rich Dad, Poor Dad. For those who like to get information through listening, she suggests the “Popcorn Finance” and “Her Dinero Matters” podcasts.

When you can, supplement your research with an in-person workshop, adds Torres-Haddad. “Even going to one financial literacy workshop can have a life-changing effect,” she says. A good time to find free workshops is April, which is Financial Literacy Month in the US. One of the best investments you can make in your life is to educate yourself about money, says Torres-Haddad. “It can really give you a lot of peace of mind.”

By: Erin McReynolds

Source: How Financially Literate Are You? 3 Things You Should Know About Your Money

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How to Budget After Closing Costs When Buying a Home

Anyone who’s buying their first home has probably gotten used to stalking their bank accounts leading up to their closing making sure they’re beefing up their savings for a down payment and closing costs. According to Zillow, the median price of a home sold in America [as of December 2020] is $262,604. Putting 20 percent down on that home will cost you $52,520.

Factor in about two to five percent of the home price for closing costs, ($13,130 for five percent) and you’re easily down about $65,650 before you’ve stepped foot into your bare home. Sure, you’re trying to get to the 20 percent mark in order to avoid paying private mortgage insurance (PMI), but if you don’t factor in other costs you’ll accrue in the coming weeks and years, you might be biting off more than you can chew.

Read on to assess whether you’ll still have money left over for the things important to you after closing, or if perhaps you should be looking for a lower-priced home in order to make sure you can still maintain your lifestyle and have a beautiful space of your own.

1. Factor in Your New Bills

“A lot of people don’t bother to ask themselves what it will actually cost to live there,” says Jean Chatzky, CEO of HerMoney.com, financial editor at NBC’s “Today Show” for 23 years. Talk to someone who has a place similar to yours, whether it’s a house or a condo, that’s around the same size, in your neighborhood or building, and ask them to share their costs for heat, electricity, cable, and water. “Learning about the other associated expenses with buying this home can be eye-opening,” says Chatzky.

2. Consider Decorating Expenses

It’s important to add personal elements that will turn your house or condo into a home. “Making the home yours costs money whether you’re talking about paint or a trip… to buy all new furniture,” says Chatzky. “While purchasing a home is a big investment, it’s important to budget for the items that you’ll need to fill your home,” says Tina Rich, NYC-based interior designer. “Filling your space with furniture and accessories you’ve selected and love is what makes a house a home, so it’s important that you don’t clean out your bank account before you close.”

3. Decide Which Furniture You’ll Need First

“The best investment you can make is a quality bedroom set,” says Michael Robinson, furniture designer at American Modern Collection. “Granted, I have a biased opinion since I design bedroom collections.” He says that when people buy a high-quality bedroom set, they can have it for 25 years. “We’re a society that’s used to getting rid of stuff often and I think many often lose perspective of what quality actually is and why people used to buy quality products,” he said. Can you get a discount bedroom set under $1,000? Sure.

But it won’t likely be made from solid wood and built to last. Robinson says the Amish-made, wooden bedroom sets he designs for his company start around $5,000. This is where you should think about what you can make do with and are willing to replace in a few years, or whether you want furniture that lasts a few decades.

If you like to entertain, you might decide that a sofa is where you want to spend your money, or perhaps a dining room set. Research these prices and decide which items you want to splurge on as a quality investment right now, and which pieces you don’t mind getting second hand or cheap in order to fill your home.

4. Factor in Paint Costs

Whether you’re moving into a slightly larger condo or tripled your living size with a single family home, you’ll probably be painting it at some point. According to HomeAdvisor.com, hiring a professional to paint an average sized room (10 feet by 12 feet) costs between $380 to $790. Should you choose to paint a room yourself, paint will cost anywhere between $30 and $60 per gallon for a high-end brand that comes in three different finishes: flat, semi-gloss or high-gloss, according to the experts at HomeAdvisor.com.

Most rooms will require about two (gallon) paint cans. You’ll also need about two cans or primer ($7-15) for each wall so you’re looking at about $140 per room before you buy supplies. “I’m a fan of HGTV Home by Sherwin Williams because of its quality and it has a nice color range,” says Rich. “While there are always areas to save during a home renovation, paint isn’t one of them. Using a high quality paint—rather than an inexpensive brand—is crucial so your walls look professional and polished.”

5. Set Aside Money for Window Treatments

You’re excited to have rooms with beautiful natural light, but there are probably quite a few rooms in your new home that you’ll need to cover for privacy and protection from the sun. Not only do people often forget to set aside money for window treatments—whether that’s blinds, shades shutters, and curtains—they forget to factor in things like pets’ claws and children’s safety when purchasing these items, Robinson says. He recommends Hunter Douglas as a brand he sells through Unique Interiors in Cherry Hill, New Jersey.

They’ll come out and measure each window properly to ensure you get proper-fitting blinds that are best for your home and tastes. Faux wood blinds are the most popular window treatments he sells for Hunter Douglas these days. An average price point to cover a 36-inch by 60-inch window with faux wooden blinds from that company will set you back about $200. For comparison, the cheapest faux wood blinds we found at Home Depot are about $13 and cheap shades are around $7. Granted, those cheap versions won’t likely last long.

This just goes to show, even if you don’t plan on spending a lot of money on window coverings right now, you’ll still need to set aside money for the very basics in your new home.

6. Plan for Outdoor Home Costs

If you’re moving to your first house from an apartment, condo, or townhome, you might need to invest in a snow blower for your first winter there. (Consider looking for a certified refurbished one to save money.) You may need a new lawn mower, weed wacker, or a sprinkler system for your lawn. Have a front patio or back deck that needs furniture and an umbrella? That’ll be a few hundred dollars.

“Are you comfortable allowing things to look wild and beautiful, or do you want everything manicured beautifully every single month?” asks Chatzky. She suggests talking to a new neighbor about pricing. You could say: “Your landscaping is beautiful. Do you mind recommending the person who does it? Oh, and by the way, how much does it cost?” she suggests.

7. Account for Moving and Assembly Costs

Make a list of what you’re taking with you, what gaps you have, and do some shopping ahead of time so you can figure out what these items are going to cost, suggest Chatzky. If you’re shopping at IKEA or a store where the furniture needs to be put together and you are not capable of doing that yourself, you’re going to hire somebody to do it, so how much is that going to cost?

How much are the shipping fees? How much is it going to cost to have it moved? Whether you’re renting a moving truck and doing the move yourself and with friends, or hiring professional movers, you’ll be spending anywhere from about $200 to over $1,000. (Based on large truck rentals at uhaul.com, factoring in gas and mileage and taxes.)

8. Prepare for Home Maintenance Costs

“Your home inspection is a good road map to the expenses you’re going to have in the near future and you should pay close attention to that,” warns Chatzky. Harvard research shows you should plan on spending one to two percent of the value of your home every year on maintenance, says Chatzky. “Even if you don’t spend it in year one or year two, you’re likely looking at triple the expenses in year three.”

Now that you have an idea of the types of costs coming down the pipeline once you scrape out your savings account, budget for them in advance. “Think about how you’re going to use the place, how you’re going to live in the place, and what it’s going to cost you to get it into that particular kind of shape you want it in,” says Chatzky.

By: Diana Kelly

Diana Kelly is a freelance writer, consultant, and freelance writing coach. She loves taking fitness classes, squeezing in mini-workouts between articles deadlines, hanging out with her adopted puppy, Jackson, and hiding messes in closets and drawers.

Source: How to Budget After Closing Costs When Buying a Home

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11 Things Your Cleaning Person Wants to Tell You—But Won’t

Can You Paint Bathroom Tile?

10 Great Living Room Design Hacks

Here are all the winners of the 2020 Webby Awards

Big ideas for small spaces on the Web

Apartment ‘therapist’ has prescription for small spaces

Saving the world, one small room at a time

“Apartment Therapy Redesign: Inside AT’s Website Makeover

Do You Get Your Money’s Worth From Buying An Annuity?

Coin Stacks And Chart Graphs On A Chessboard

Once upon a time, in the (somewhat mythical) past of traditional defined benefit pensions, your employer protected you from the risk of outliving your money in retirement, by acting, more or less, as an insurance company providing an annuity. With that benefit receding into the past, many experts have been hoping that Americans with 401(k) plans would avail themselves of annuities on their own, to give themselves the same sort of protection, and, indeed, the SECURE Act of 2019 made it easier for those plans to offer their participants an annuity choice, and, when surveyed, 73% of those participants said they would “consider” an annuity at retirement.

At the same time, though, Americans distrust annuities — in part because traditional deferred annuities had high fees and expenses and only made sense in an era predating IRAs and 401(k)s, when they were attractive solely due to the limited tax-advantaged options for retirement savings. But that’s not the only reason — annuities, quite frankly, aren’t cheap.

How do you quantify the value of an annuity? In one respect, it’s subjective and personal: do you judge yourself to be in good health, or does family history and your list of medications say that you’ll be one of those with the early deaths that longer-lived annuity-purchasers are counting on? Do you want to be sure you can maintain your standard of living throughout your retirement, or do you figure that you won’t really care one way or another if you have to cut down expenses once you’re among the “old-old”?

But measuring the value of annuities, generally speaking, does tell us whether consumers are getting a fair deal from their purchases, and here, a recent working paper by two economists, James Poterba and Adam Solomon, “Discount Rates, Mortality Projections, and Money’s Worth Calculations for US Individual Annuities,” lends some insight.

Here’s some good news: using the costs of actual annuities available for consumers to purchase in June 2020, and comparing them to bond rates which were similar to the investment portfolios those insurance companies hold, the authors calculated “money’s worth ratios” that show that, for annuities purchased immediately at retirement, the value of the annuities was between 92% – 94% (give-or-take, depending on type) of its cost. That means that the value of the insurance protection is a comparatively modest 6 – 8% of the total investment.

But there’s a catch — or, rather, two of them.

In the first place, the authors calculate their ratios based on a standard mortality table for annuity purchasers — which makes sense if the goal is to judge the “fairness” of an annuity for the healthy retirees most likely to purchase one. But this doesn’t tell us whether an annuity is a smart purchase for someone who thinks of themselves as being in comparatively poorer health, or with a spottier family health history, and folks in these categories would benefit considerably from analysis that’s targeted at them, that evaluates, realistically, whether annuities are the right call and whether their prediction of their life expectancy is likely to be right or wrong.

In the second place, the 92% – 94% money’s worth calculation is based on the typical investment portfolio of insurance companies, approximated by the returns of BBB-rated bonds. This measures whether the annuity is “fair” or not, in that “moral” sense of whether the perception that the company is “cheating” is customers is real (it’s not).

But these interest rates are very low. The authors, in addition to their calculations of “money’s worth,” back into the implied discount rate from the annuity costs themselves. For men aged 65, that interest rate is 2.16%; for women aged 65, 2.18%.

Now, imagine that you compare this annuity to an alternative plan of investing your money in the stock market, earning 7% annual returns, and believing you can predict your death date (or not really caring if you fall short or end up with leftover money for heirs).

The cost of the protection offered by the annuity, the guarantee that you will never run out of money, and that you will not suffer from a market crash, is very expensive indeed — when you compare apples to oranges in this manner, the money’s worth ratio is, according to my very rough estimates, more like 60%, meaning that about 40% of your cash is spent to purchase the “insurance protection” of the annuity.

And, again, that’s not because insurance companies are cheating anyone; that’s solely because of the wide gap between corporate bond rates and expected returns when investing in the stock market— a gap which was particularly wide in the summer of 2020 when this study was competed, but remains nearly as wide now.

As it stands, Moody’s Baa rates are in the 3% range; in the 2000s, they were in the 6% range, and in the 1990s, from 7% – 9%. Although this drop in bond rates is good news for American homebuyers because this marches in tandem with mortgage rates, it makes it far harder for retirees to manage their finances in ways that protect them from the risks that they face in their retirement.

Perhaps interest rates in general, and bond rates specifically, will increase as we leave our current economic challenges, but there’s no certainty, and as long as this gap between bond rates and expected stock market returns remains so substantial, retirees will be challenged to find any sort of safe investment that makes sense for them. Which means that what seems like a great benefit for Americans looking to borrow money — for mortgages, car loans, credit cards — can pit the elderly against the young in a generational “us vs. them” contest.

As always, you’re invited to comment at JaneTheActuary.com!

Follow me on Twitter. Check out my website.

Yes, I’m a nerd, and an actuary to boot. Armed with an M.A. in medieval history and the F.S.A. actuarial credential, with 20 years of experience at a major benefits consulting firm, and having blogged as “Jane the Actuary” since 2013, I enjoy reading and writing about retirement issues, including retirement income adequacy, reform proposals and international comparisons.

Source: Do You Get Your Money’s Worth From Buying An Annuity?

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Critics:

An annuity is a series of payments made at equal intervals.[1] Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time. Annuities may be calculated by mathematical functions known as “annuity functions”.

An annuity which provides for payments for the remainder of a person’s lifetime is a life annuity.

Variability of payments

  • Fixed annuities – These are annuities with fixed payments. If provided by an insurance company, the company guarantees a fixed return on the initial investment. Fixed annuities are not regulated by the Securities and Exchange Commission.
  • Variable annuities – Registered products that are regulated by the SEC in the United States of America. They allow direct investment into various funds that are specially created for Variable annuities. Typically, the insurance company guarantees a certain death benefit or lifetime withdrawal benefits.
  • Equity-indexed annuities – Annuities with payments linked to an index. Typically, the minimum payment will be 0% and the maximum will be predetermined. The performance of an index determines whether the minimum, the maximum or something in between is credited to the customer.

See also

References

  • Kellison, Stephen G. (1970). The Theory of Interest. Homewood, Illinois: Richard D. Irwin, Inc. p. 45
  • Lasher, William (2008). Practical financial management. Mason, Ohio: Thomson South-Western. p. 230. ISBN 0-324-42262-8..
  1. Jordan, Bradford D.; Ross, Stephen David; Westerfield, Randolph (2000). Fundamentals of corporate finance. Boston: Irwin/McGraw-Hill. p. 175. ISBN 0-07-231289-0.
  • Samuel A. Broverman (2010). Mathematics of Investment and Credit, 5th Edition. ACTEX Academic Series. ACTEX Publications. ISBN 978-1-56698-767-7.
  • Stephen Kellison (2008). Theory of Interest, 3rd Edition. McGraw-Hill/Irwin. ISBN 978-0-07-338244-9.

Is Patient Financing Right for Your Health Practice?

In these times of post-pandemic financial uncertainty, additional return on investment for medical providers is more welcome than ever. Patient financing — which for the purposes of this article means partnering with an external lender to provide service and procedure payments — can produce not just steady income for a practice, but help ensure that patients won’t have to put off procedures or, worse yet, abandon them altogether.

For example, Toronto Plastic Surgeons provides this facility to its patients through Medicard Patient Financing. There are also veterinary financing services for pets available through Medicard Patient Financing. What are some reasons practitioners might have employed in deciding upon this option?

No More Delays

There are, unfortunately, economic disparities when it comes to accessing healthcare services. Too often, the high-income and privileged have more access to healthcare resources than the medium- and low-income populations. Patient financing can help in reducing this imbalance, because the simple and daunting truth is that many medical problems don’t come announced, and it’s often impossible to plan for their associated expenses. With financing, patients don’t need to wait to get their accounts in order before opting for procedures — the result is, ideally, prompt and less stressful treatment.

Related: Fintech fuelling growth in Healthcare Financial Industry

Increased Patient Satisfaction

Since clients can often better manage their expenses via patient financing, they tend to be more satisfied on the whole. In part this is because they are not stressed and burdened with sudden financial decisions associated with urgent medical procedures. Better yet, they are more likely to stay loyal to a practice if they don’t have to worry as much. Compared to other practices that don’t offer this option, they are more likely to choose the former, which can mean increased business through word of mouth.

Reduced Collection Costs

When you partner with a patient financer, you receive payments on time. It also means that your team won’t spend needless hours and energy trying to collect payments.

Steady Cash Flow and Less Bad Debt

In setting up a conventional payment plan for a patient, your team is taking the responsibility of keeping tabs on payments and collecting them on time. It’s essentially extending a loan to a patient, typically without any interest. However, expenses like bills, payroll and lease/rent go on as usual. This can lead to tied up in , which will easily and quickly impact a budget. But when you opt for association with a patient financing company, the latter bears the cost of collections, including giving you the option of getting payment upfront.

Related: Healthcare is in Turmoil, But Technology Can Save Businesses Billions

Better Marketing

Association with a financing company with its own marketing arm can help promote a business — making your clinic stand out in comparison to competitors.

Which to Choose?

When it comes to financing models, three predominate. In the first, Self-Funding, you as the healthcare provider are responsible for receivables. From creating a payment schedule to collecting funds to following up with the patient, your team carries out all the tasks. In the Recourse Lending model, you work with a patient financier/lender, which will approve a patient’s loan after the business/practice passes qualifying criteria.

If the patient doesn’t pay, the lending/financing company will recover the losses from you. Among the drawbacks here is that the practice will have to bear the losses and lender’s fees. Lastly, there is the Non-Recourse Lending model. Similar to the second, you work with a lending company. Key differences are that it is the patient who has to pass the underwriting criteria (if the lender doesn’t approve the patient, no funding is provided by them), and that losses are borne by the lender. One disadvantage of this method is that the lenders charge interest from patients; when rates are high, patients might not be interested. Also, patients with a weak credit history might be rejected during the underwriting evaluation.

By : Chris Porteous / Entrepreneur Leadership Network Contributor – High Performance Growth Marketer

Source: Is Patient Financing Right for Your Health Practice?

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Critics:

Publicly funded healthcare is a form of health care financing designed to meet the cost of all or most healthcare needs from a publicly managed fund. Usually this is under some form of democratic accountability, the right of access to which are set down in rules applying to the whole population contributing to the fund or receiving benefits from it.

The fund may be a not-for-profit trust that pays out for healthcare according to common rules established by the members or by some other democratic form. In some countries, the fund is controlled directly by the government or by an agency of the government for the benefit of the entire population. That distinguishes it from other forms of private medical insurance, the rights of access to which are subject to contractual obligations between an insured person (or their sponsor) and an insurance company, which seeks to make a profit by managing the flow of funds between funders and providers of health care services.

When taxation is the primary means of financing health care and sometimes with compulsory insurance, all eligible people receive the same level of cover regardless of their financial circumstances or risk factors.

Most developed countries have partially or fully publicly funded health systems. Most western industrial countries have a system of social insurance based on the principle of social solidarity that covers eligible people from bearing the direct burden of most health care expenditure, funded by taxation during their working life.

Among countries with significant public funding of healthcare there are many different approaches to the funding and provision of medical services. Systems may be funded from general government revenues (as in Canada, United Kingdom, Brazil and India) or through a government social security system (as in Australia, France, Belgium, Japan and Germany) with a separate budget and hypothecated taxes or contributions.

The proportion of the cost of care covered also differs: in Canada, all hospital care is paid for by the government, while in Japan, patients must pay 10 to 30% of the cost of a hospital stay. Services provided by public systems vary. For example, the Belgian government pays the bulk of the fees for dental and eye care, while the Australian government covers eye care but not dental care.

Publicly funded medicine may be administered and provided by the government, as in the Nordic countries, Portugal, Spain, and Italy; in some systems, though, medicine is publicly funded but most hospital providers are private entities, as in Canada. The organization providing public health insurance is not necessarily a public administration, and its budget may be isolated from the main state budget. Some systems do not provide universal healthcare or restrict coverage to public health facilities. Some countries, such as Germany, have multiple public insurance organizations linked by a common legal framework. Some, such as the Netherlands and Switzerland, allow private for-profit insurers to participate.

See also

How Much Money Is ‘Enough’? Try This Experiment to Get an Exact Number to Aim For

a wad of money secured with a blue paper clip on a pink background

Have you ever read those articles where some extremely well-off family details their budget and then bemoans that they’re barely getting by?

It’s ridiculous that anyone could complain about raking in $350,000 a year, and it’s clear many of these folks are wildly out of touch with how privileged they are. But while these families may be extreme (and annoying), they aren’t alone. It’s not just the wealthy who fall into the trap of earning more only to spend more and feel just as dissatisfied.

How do you get off this treadmill?

The answer is not to compare yourself with others (Jeff Bezos will always be there to make you feel bad), or to blindly try to keep making more (there will always be some shiny, new thing to covet). The answer is to take a hard look at your own financial realities and aspirations and come up with a goal number. How much money is enough for you?


The Science of Money and Happiness

That number will be different for everyone, depending on your circumstances and values, but science can give us some sense of how much money might be “enough.” Research shows that up to a certain threshold (studies consistently put it at about $75,000 dollars a year, give or take a bit depending on cost of living) money has a big impact on both day-to-day happiness and life satisfaction.

If you’re below this level, making more will likely make you significantly happier. But beyond that point, each additional dollar adds a little less to your life. There is a level of wealth way before Bill Gates status that trading more effort and time for more money ceases to make sense (even Bill Gates says so).


Name Your Number

One way to calculate that point is to figure out how much money you’d need to make decisions based entirely on enjoyment and impact, without pressure to earn. This is the goal of the catchily named FIRE movement (for financial independence, retire early). Its boosters generally say that 25X your expected annual expenses is enough. So if $50,000 a year is enough for you to live comfortably, you need to save $1.25 million.

There are other more elaborate calculators that can give you a sense of what financial independence means for you. But perhaps the best way to get a feeling for your goal number isn’t math but a simple thought experiment from writer Brad Stollery:

Suppose you’re one of five people who have been selected by a mysterious philanthropist to participate in a contest. The five of you all have comparable debt-levels and costs-of-living, as well as similar, middle-class financial situations. You’re all roughly the same age, equally healthy, have the same number of children, and you all live moderately low-risk lifestyles. Privately, and one by one, a representative of the donor approaches each of you with a blank check and a pen, and poses the following question:

How much money would you have to be paid, right here and now, to retire today and never receive another dollar of income (from any source) for the rest of your life?

The catch this time is that whoever among the five players writes the lowest amount on the check will be paid that sum. The other four players will get nothing.

This thought experiment forces you to cut away the natural impulse to aim ever upward (if you do that you’ll bid too high and get nothing). That result is however much you ask for is your number, the amount you’d need to live comfortably and pursue your goals if status and lifestyle inflation weren’t a factor.

Your answer might be a little bit higher or lower than mine or your neighbor’s. That’s fine. It’s not important everyone agree on a number. The important thing is that we each reflect enough to have one.

Because the alternative is being one of those people confessing online how you burn through a healthy six-figure salary and still feel stressed and dissatisfied. Your expenses and desires can be infinite. If you don’t want to chase them miserably forever, you need to put a cap on your financial ambitions yourself.

By: Jessica Stillman

This post originally appeared on Inc. and was published February 5, 2020. This article is republished here with permission.

Did you enjoy this story? Get Inc.’s daily newsletter

Source: Pocket

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References

How To Think Though Hard Financial Choices And Make Better Money Decisions

https://i1.wp.com/onlinemarketingscoops.com/wp-content/uploads/2021/05/shutterstock_710867164-648x364-c-default.jpg?resize=924%2C519&ssl=1

When you first learn to manage your money, you will likely feel like you are drowning in a sea of strict rules to follow: Pay off your debt, create a budget, live within your means, save more, start investing… the list goes on.

The nice thing about being in this stage, however, is that it’s pretty easy to find objectively correct answers to the questions you likely have at this point.

There’s one specific answer if you ask “what is a Roth IRA and what are the income limits if I want to contribute.” There’s a systematic way to figure out the answers to questions like, “how can I save up X amount of dollars in Y amount of time?”

But eventually, you will find an inflection point. It lies just beyond basic financial stability; it’s everything that comes after you develop sufficient financial resources.

At this point, you’ll face a new challenge: feeling confident about your decisions when you have multiple choices you could make with your money, and none of them are objectively better than another.

The Challenges Of Managing Your Money (Once You Have More To Manage)

Before you reach a certain level of income, you don’t really have a lot of agency over how you use your money; it has to go to bills, expenses, basic needs and savings. You don’t have a lot of options.

But at some point, your personal finances can no longer be managed on a spreadsheet alone. You’ll begin to have more freedom and flexibility, and therefore more choice.

When there are multiple avenues you can afford to take, determining which of your multiple choices starts getting hard to do.

One way to make a hard decision is to evaluate the objective facts around the options. This is where numbers do matter and can sometimes point us to very clear answers (like if you’re wondering if you should pay off debt faster or invest more; the answer could be easy to determine just by looking at the interest rate of your debt versus your expected investment return).

Financial choices can start feeling hard — or even impossible — once there is no objective measure of which option is better or worse. If the numbers tell you that either option can work for you, you can’t rely solely on that objective measurement to determine the best course of action.

It’s at this point where the conversation has to shift to subjective values.

The Role Of Your Values, Priorities, And Preferences In Financial Planning

In her TED Talk, Philosopher Ruth Chang says this is what truly makes a hard decision: when we have two options, we seek ways to compare them and make a judgement about which is better.

Comparing options is easy to do when you can quantify the options with real numbers, because you have clear outcomes: one option will be greater than, lesser than, or equal to the other.

But not all choices — even when they are financial choices or decisions about what to do with your money — can be quantified.

As Chang says, “the world of value is different from the world of science. The stuff of the one world can be quantified by real numbers. The stuff of the other world can’t.”

It might seem strange to say there are aspects of your finances that can’t be quantified by real numbers — but that’s exactly what happens when you get to a point where your income sufficiently covers your needs, many of your wants, and you still have money left over each month.

You then get to choose what to do with the money you have available.

Chang again explains that this is exactly what makes a decision hard: you have a number of alternatives that are not greater than, lesser than, or equal to each other.

There’s no set answer for the things you “should” do, or “ought” to do. That’s open-ended. The only real answer is what you decide is important to you, and of the highest value.

How You Can Improve The Quality Of Your Financial Decisions

In her TED Talk, Chang provides some advice for making better decisions when we face two options that, objectively, are pretty equal to each other and therefore there is no clear-cut “best” choice:

“When we face hard choices, we shouldn’t beat our head against a wall trying to figure out which alternative is better. There is no best alternative. Instead of looking for reasons out there, we should be looking for reasons in here: Who am I to be?”

Put another way, you can find the right answer to a hard choice if you consider which option best aligns with the person you want to be, or the values you want to live by.

That, at least, is the very philosophical answer to dealing with hard choices, which might not feel practice enough (especially when this is your money we’re talking about).

Using our values and ideal life vision to make financial decisions does not mean we should just completely throw all the numbers out the window and stop caring about financial facts.

We still need to consider your balance sheet, investment strategy, net worth, and a million other technical aspects that go into making a sound financial plan.

We need to look at the convergence of what we can quantify, like the numbers, and what we can’t, like your values and vision for your life.

This is how you can start making much higher-quality financial decisions: when you build a strategy that accounts for your financial reality and reasonable future assumptions and then factor your values, goals, and priorities into that framework.

That allows you to stay grounded in what the numbers are telling you… but it also points to the secret to making final decisions that bring you the most happiness and fulfillment.

Once you understand the objective landscape of your financial life and identify the choices you have available to you, the “best” course of action for you is the one that most closely reflects the person you want to be.

Eric Roberge is a CFP® and the founder of Beyond Your Hammock, a fee-only financial planning firm based in Boston. His goal is to help motivated professionals in their

Source: How To Think Though Hard Financial Choices And Make Better Money Decisions

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References

“The Future of Jobs Report 2018” (PDF).

5 Pieces of Money Advice No One Ever Wants to Hear From Me

You know how adults always told you to “eat your veggies” and greens when you were a kid? Well, that nagging advice doesn’t necessarily stop in adulthood. As a financial planner, I’m constantly giving people good advice they don’t want.

I know no one wants to hear this kind of money advice. But those who do listen — and more importantly, implement these ideas — tend to have better control over their cash flow, higher savings rates, and more financial power.

You might not like it, but much like eating broccoli and kale, taking it in is often for your own good.

1. Don’t buy so much house

Buying a home is rarely a data-driven decision. It’s an emotional one, and for good reason. For many people, homeownership represents stability, security, and even status.

These are not unimportant things, but too many people use their emotions as excuses to throw financial reality out the window when it comes to house hunting.

Set a budget and stick to it. We often recommend keeping your total annual housing costs to no more than 20% of your gross annual household income.

This helps ensure you retain flexibility in other areas of your cash flow so that you can own your home and keep pursuing other important goals or have money available for your other priorities.

2. And don’t assume your house is a good investment

I often caution people against thinking of their home as an investment. Again, that doesn’t mean buying is a bad idea or your house isn’t worth as much as you think it is. But an investment should provide a return.

A single-family home that serves as your primary residence (and does not provide rental income) may be an excellent utility. It is not, however, what I would consider a good investment.

Home values do tend to rise over time, but the cost of ownership, maintenance, and upkeep often erode most of the “gains” you might see when just looking at the transaction of buying and then selling your home on paper.

A reasonable, real return on single-family homes runs about 2%. That’s not nothing, but it’s also not something you can assume will fund your full retirement, either (especially when you have to live somewhere, retired or not, and most people put the equity from a home sale into their next purchase).

3. Save more than you think you need to

It’s really important to me that I help my clients strike a balance between enjoying their lives in the present while also building assets and future financial security. This would be much easier to do if we had a crystal ball and could accurately predict what life would be like in 10, 20, even 30 years.

We’d know your budget. We’d know what kinds of emergencies you’d have to deal with, and prepare accordingly. And we’d understand what your life would look like (including how long it would be).

With that clarity, it would be possible to say, “you need $X. Save just that and feel free to spend the rest.” That is, obviously, not how life works.

The solution? Save more than you think you need to, because then you give yourself a margin of safety. By saving more than you necessarily must save to “be OK,” you can better:

  • Handle emergencies
  • Take advantage of opportunities when they come up (either to spend on an unexpected trip, for example, or to use money on an investment you feel passionate about)
  • Incorporate new goals into your planning over time

Saving more that you think you need today also buys you more choice and freedom in the future. The usual guideline I give to clients to help them achieve this is to save 25% of annual gross income.

4. Have a backup plan

It might sound like a doom-and-gloom approach to finances, but I preach about always having a backup plan — or those margins of safety, or wiggle room, or contingencies.

No one wants to imagine a worst-case scenario, but if something actually went sideways in your financial life, you’ll be glad you had multiple levels of safety net built into your overall plan.

You can do this in a number of ways, including some we’ve already talked about, like saving more than you think you need to save.

Other ways of building in backups is by maintaining an emergency fund, using conservative assumptions around income, and overestimating your expenses when you do any kind of long-term financial projection, and not counting on any kind of windfall (from bonuses and commissions to inheritances) to make your plan work.

5. Stop trying to time the market

It is so tempting to think we can successfully time the market. Why? Because drops and spikes in the stock market look stupidly obvious with hindsight.

It’s very easy to look back at something like 2008 (or maybe even the spring of 2020 at this point) and feel like you know when the best times to buy and sell would have been… because they already happened. 

Guessing what comes next without the benefit of knowing how things played out is not the same thing. Data shows us that even professionals fail to time the market repeatedly. You may get lucky once, but repeating that performance over and over again for the next few decades is virtually impossible.

Build a strategic investing plan — and then stick to it, regardless of current events.

It’s probably not as fun and may not be as sexy as bragging about your stock picks on Robinhood, but it works a whole lot better in the long run.

By:

Eric Roberge, CFP, is the founder of Beyond Your Hammock. He helps professionals in their 30s do more with their money.

Source: 5 Pieces of Money Advice No One Ever Wants to Hear From Me

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More Contents:

How to Ensure Love Doesn’t End Your Business

Surely you have ever heard that mixing love and business is not a very good option, which is not necessarily true, since the success of a business will always depend on how its owners manage it and not on their kinship.

The simple fact of starting a business is a great challenge that generates fear, and if your idea is to start with your partner, this can become an even greater challenge, which few dare to try. According to figures from the 2016 Global Entrepreneurship Monitor (GEM) Annual Report, approximately 34% of entrepreneurs are afraid of failure.
So that this does not happen to you, it is necessary that you take into account the following tips, which will be very useful when starting a business together with your partner:

1. Define objectives: before starting your business, it is important that you define the objectives you want to achieve in the short, medium and long term, as this will help you to have a guide for decision making.

2. Make a budget: it is essential that from the beginning they consider what expenses they will have month after month and that they keep an updated record of their income and expenses. To do this, I recommend you download the Monthly Budget format for free, with which you can significantly improve your business finances.

3. Establish their functions: discuss and agree on what functions they will have, the position they will carry out and the specific and general objectives. This will help them to have a better organization and avoid conflicts.

4. Separate personal finances: when they have defined what functions they will perform, it is necessary that each one has a salary assigned, since one of the worst financial mistakes they can make is to take the money that is destined for the business to pay your personal expenses.

5. Emergency fund: they must take into account that if they decide to work in the same business, all income will depend on a single source of work, so if the business stops operating, the income of both can be seriously threatened. For this reason, they must have a cash emergency fund that allows them to cover at least three months of their monthly expenses and which they only use for a true emergency.

Remember that love should not be an impediment for a business to grow and be maintained, undertaking as a couple can also bring you great benefits that improve your relationship. The only thing that must be maintained is communication and organization.

By: Alejandro Saracho

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TEDx Talks

Community growth expert and business mentor Best-selling author and business strategist Jadah Sellner believes that all business is personal, and that love has a very important role in the workplace. Why You Should Listen: At no other time in our history have humans been so connected — and so lonely. And companies that can tap into our innate need to be part of a tribe will stand head and shoulders above the crowd.

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5 Things You Should Know About Capital Gains Tax

A capital gain occurs when you sell something for more than you spent to acquire it. This happens a lot with investments, but it also applies to personal property, such as a car. Every taxpayer should understand these basic facts about capital gains taxes.

Capital gains aren’t just for rich people

Anyone who sells a capital asset should know that capital gains tax may apply. And as the Internal Revenue Service points out, just about everything you own qualifies as a capital asset. That’s the case whether you bought it as an investment, such as stocks or property, or for personal use, such as a car or a big-screen TV.

If you sell something for more than your “basis” in the item, then the difference is a capital gain, and you’ll need to report that gain on your taxes. Your basis is usually what you paid for the item. It includes not only the price of the item, but any other costs you had to pay to acquire it, including:Your resource on tax filingTax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.Go Now

  • Sales taxes, excise taxes and other taxes and fees
  • Shipping and handling costs
  • Installation and setup charges

In addition, money spent on improvements that increase the value of the asset—such as a new addition to a building—can be added to your basis. Depreciation of an asset can reduce your basis.

In most cases, your home is exempt

The single biggest asset many people have is their home, and depending on the real estate market, a homeowner might realize a huge capital gain on a sale. The good news is that the tax code allows you to exclude some or all of such a gain from capital gains tax, as long as you meet three conditions:

  1. You owned the home for a total of at least two years in the five-year period before the sale.
  2. You used the home as your primary residence for a total of at least two years in that same five-year period.
  3. You haven’t excluded the gain from another home sale in the two-year period before the sale.

If you meet these conditions, you can exclude up to $250,000 of your gain if you’re single, $500,000 if you’re married filing jointly.

AdChoices

Length of ownership matters

If you sell an asset after owning it for more than a year, any gain you have is a “long-term” capital gain. If you sell an asset you’ve owned for a year or less, though, it’s a “short-term” capital gain. How much your gain is taxed depends on how long you owned the asset before selling.

  • The tax bite from short-term gains is significantly larger than that from long-term gains – typically 10-20% higher.
  • This difference in tax treatment is one of the advantages a “buy-and-hold” investment strategy has over a strategy that involves frequent buying and selling, as in day trading.
  • People in the lowest tax brackets usually don’t have to pay any tax on long-term capital gains. The difference between short and long term, then, can literally be the difference between taxes and no taxes.

Capital losses can offset capital gains

As anyone with much investment experience can tell you, things don’t always go up in value. They go down, too. If you sell something for less than its basis, you have a capital loss. Capital losses from investments—but not from the sale of personal property—can be used to offset capital gains.

  • If you have $50,000 in long-term gains from the sale of one stock, but $20,000 in long-term losses from the sale of another, then you may only be taxed on $30,000 worth of long-term capital gains.
    • $50,000 – $20,000 = $30,000 long-term capital gains

If capital losses exceed capital gains, you may be able to use the loss to offset up to $3,000 of other income. If you have more than $3,000 in excess capital losses, the amount over $3,000 can be carried forward to future years to offset capital gains or income in those years.

Business income isn’t a capital gain

If you operate a business that buys and sells items, your gains from such sales will be considered—and taxed as—business income rather than capital gains.

For example, many people buy items at antique stores and garage sales and then resell them in online auctions. Do this in a businesslike manner and with the intention of making a profit, and the IRS will view it as a business.

  • The money you pay out for items is a business expense.
  • The money you receive is business revenue.
  • The difference between them is business income, subject to employment taxes.

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