This guy ONLY makes 80 grand a year.
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What I discovered is many making 150,000 a year but living like they make $500,000 a year, or more until the day the balloon bursts.
MY opinion is that if you can't make the payments on a house and pay for it in 15 years on a conventional mortgage then you are buying too much house. If you don't have 6-12 months expenses in the bank to carry you during a job layoff, then you have no business spending on anything frivolous. That includes going out to eat even McDonalds, jewelry, expensive clothes, cars beyond simple transportation, and fancy stuff to spoil your kids like lessons, private school and camps. If you don't save 5-7% of your before taxes income for retirement then you are irresponsible in planning for your future.
As Bob said, it isn't about how much you make it is about how much you spend!
MY opinion is that if you can't make the payments on a house and pay for it in 15 years on a conventional mortgage then you are buying too much house. If you don't have 6-12 months expenses in the bank to carry you during a job layoff, then you have no business spending on anything frivolous. That includes going out to eat even McDonalds, jewelry, expensive clothes, cars beyond simple transportation, and fancy stuff to spoil your kids like lessons, private school and camps. If you don't save 5-7% of your before taxes income for retirement then you are irresponsible in planning for your future.
As Bob said, it isn't about how much you make it is about how much you spend!
I often have a knee jerk when I hear this, but I understand that people are thinking about those who squander wealth. It doesn't take into effect what a medical crisis can do to a family. I read last year that 38% of all recent bankruptcies had a medical component.
My wife died in June, 2008, but I still paid over $40k in residual medical bills just in 2009. How do you dig out with these sort of expenses? I lost everything, including my business and my house when Cindy got sick and needed round the clock care in 2007. I did NOT declare bankruptcy, but went to work as a contractor and tried to honor my debts. The point is that the medical establishment including providers and insurance companies have not played fair. They have used all sorts of delaying tactics, ignoring registered letters, bouncing me among a dozen different offices, etc in order to get me to give up and pay whatever they wanted. In 2008, I paid over $25K in premiums, but I still ended up paying over $65K for services rendered after my supposed max out of pocket was met for the year. (edit: that $65k included the premiums, so this is misleading. $40K additional OOP in both 2008 and 2009)
My wife died in June, 2008, but I still paid over $40k in residual medical bills just in 2009. How do you dig out with these sort of expenses? I lost everything, including my business and my house when Cindy got sick and needed round the clock care in 2007. I did NOT declare bankruptcy, but went to work as a contractor and tried to honor my debts. The point is that the medical establishment including providers and insurance companies have not played fair. They have used all sorts of delaying tactics, ignoring registered letters, bouncing me among a dozen different offices, etc in order to get me to give up and pay whatever they wanted. In 2008, I paid over $25K in premiums, but I still ended up paying over $65K for services rendered after my supposed max out of pocket was met for the year. (edit: that $65k included the premiums, so this is misleading. $40K additional OOP in both 2008 and 2009)
jayn_j
First let me express my sympathies for your loss. I can't imagine what you have gone through.
But, I do understand what it is like to lose a job, and even last year was forced to give up my rather lucrative business in TV advertising, to care for a family member. But in my case it was a matter of deciding what was the best case for my family's future and so far I think we made the right decision. I am fortunate to have good health care insurance and the one I give care for also has good medical benefits and self sustaining income from many years of proper retirement planning.
This brings me to your point about the valid statistic of many ( 38%) file bankruptcy due to a medical catastrophe. Do you know how many of those catastrophes in that 38% were self inflicted by bad lifestyle choices, bad decisions on insurance budgeting, or were due to ruthless and illegal insurance company denials of payment? MY wife works in this end of the health insurance business and she knows the facts. All too often people have trouble because they simply did not make the right decisions on their insurance needs. Others, led a lifestyle that greatly contributed to poor health and then assumed they were invincible. The very small group remaining actually fell victim to actual insurance policy limits and claims clerical errors that they did not try to resolve with the insurance company. A huge number in recent years were cobra lapses and new job probationary periods of lapses of coverage which create a prior existing condition lasting for a maximum of one year. Many will try to save money by allowing COBRA to lapse during the new job probationary period and this bites them in the butt 11 months after new insurance takes effect with a pre-ex denial of claims. If people understood the terms of their insurance and didn't make stupid life choices, we believe that 38% would be reduced to under 5%. In other words, the financial problems are again self inflicted.
This is not to say that there are not flaws in the health insurance industry that are the fault of the industry. God only knows that is why we are looking to more government regulation of the industry with reform. Stuff like lifetime maximums which are often too low, and complete imbalance of services available based on your coverage, i.e. where the insurance company dictates to the doctors what your medical needs are based on some made up lists, or network authorized doctors vs out of network care during an emergency.
There are always individual examples and exceptions, but in general, personal choices have been the greatest influence over your own future security.
First let me express my sympathies for your loss. I can't imagine what you have gone through.
But, I do understand what it is like to lose a job, and even last year was forced to give up my rather lucrative business in TV advertising, to care for a family member. But in my case it was a matter of deciding what was the best case for my family's future and so far I think we made the right decision. I am fortunate to have good health care insurance and the one I give care for also has good medical benefits and self sustaining income from many years of proper retirement planning.
This brings me to your point about the valid statistic of many ( 38%) file bankruptcy due to a medical catastrophe. Do you know how many of those catastrophes in that 38% were self inflicted by bad lifestyle choices, bad decisions on insurance budgeting, or were due to ruthless and illegal insurance company denials of payment? MY wife works in this end of the health insurance business and she knows the facts. All too often people have trouble because they simply did not make the right decisions on their insurance needs. Others, led a lifestyle that greatly contributed to poor health and then assumed they were invincible. The very small group remaining actually fell victim to actual insurance policy limits and claims clerical errors that they did not try to resolve with the insurance company. A huge number in recent years were cobra lapses and new job probationary periods of lapses of coverage which create a prior existing condition lasting for a maximum of one year. Many will try to save money by allowing COBRA to lapse during the new job probationary period and this bites them in the butt 11 months after new insurance takes effect with a pre-ex denial of claims. If people understood the terms of their insurance and didn't make stupid life choices, we believe that 38% would be reduced to under 5%. In other words, the financial problems are again self inflicted.
This is not to say that there are not flaws in the health insurance industry that are the fault of the industry. God only knows that is why we are looking to more government regulation of the industry with reform. Stuff like lifetime maximums which are often too low, and complete imbalance of services available based on your coverage, i.e. where the insurance company dictates to the doctors what your medical needs are based on some made up lists, or network authorized doctors vs out of network care during an emergency.
There are always individual examples and exceptions, but in general, personal choices have been the greatest influence over your own future security.
I can only speak for my own situation and that of friends and acquaintances. In my case, it was a ten year breast cancer battle where the cancer got into the brain. I had what was considered an excellent HMO health care plan through Hewlett-Packard. When HP laid me off in 2001, I was careful to maintain the COBRA and convert to an individual policy in order to prevent a lapse. When the business was established, we brokered a group policy for a PPO with the same company (United Healthcare/PacifiCare), and I kept this policy in force until her death. I continued to pay this policy, even when I didn't have food to put on the table.
Upon Cindy's death United Healthcare cancelled my group policy because "a majority of the policyholders in the group were residing outside of Colorado". I discovered this by having a prescription claim denied. There was no notification. A 4 month fight followed where the company tried everything in their power to deny me the right to obtain follow-on coverage FROM ANOTHER PROVIDER! It took a lawyer, proof of payments, proof of covered bills and action from the Illinois insurance commissioner to get me coverage under the Illinois forced coverage pool.
My current insurance is not nearly as good, but I feel it was not because of any failure on my part. I took the correct actions at every step and still had to fight hard in order to keep any coverage at all.
Makes it very hard for me to believe that this is mostly the fault of the individual. You cannot expect the average person to have the background and training that your wife has, and I believe that the average Joe can't be expected to know what is necessary, or what the implications are for any particular action.
Upon Cindy's death United Healthcare cancelled my group policy because "a majority of the policyholders in the group were residing outside of Colorado". I discovered this by having a prescription claim denied. There was no notification. A 4 month fight followed where the company tried everything in their power to deny me the right to obtain follow-on coverage FROM ANOTHER PROVIDER! It took a lawyer, proof of payments, proof of covered bills and action from the Illinois insurance commissioner to get me coverage under the Illinois forced coverage pool.
My current insurance is not nearly as good, but I feel it was not because of any failure on my part. I took the correct actions at every step and still had to fight hard in order to keep any coverage at all.
Makes it very hard for me to believe that this is mostly the fault of the individual. You cannot expect the average person to have the background and training that your wife has, and I believe that the average Joe can't be expected to know what is necessary, or what the implications are for any particular action.
I think one common theme here is that experience is the best teacher. Some of us lack that experience and may be making poor financial choices as a result. If I knew 30 years ago what I know now I would be a millionaire several times over, barring the a/m medical/insurance problems. The biggest difference for me would be NOT trying to live a lifestyle on the edge of disaster, NOT financing non-essentials (permanent housing and education being the only exceptions) and saving as much as possible for the proverbial rainy day and eventual retirement that I would hopefully attain someday.
It took me the better part of those 30 years to get into debt (happened quickly) then dig myself back out of it. I had a similar situation with a wife with lifelong medical problems (diabetes and the eventual consequences) but fortunately for me a combination of insurance that did not cause any problems and her early qualification for Medicare took care of most of the associated costs including her very expensive dialysis treatments for end-stage renal failure. I was indeed fortunate in that sense and I am ever grateful for my current situation. But I have seen much worse all around me, like jayn_j describes, and I am trying to protect myself accordingly in case my health turns sour. That includes some active lifestyle changes to get myself in better shape (better diet, daily exercise, routine check-ups) and health insurance to match my current situation (high-deductible CDHP with a tax-deductible HSA to cover the deductibles and incidentals, and a $5 mil. lifetime max.).
My recommendation to any who care to hear it is to NOT go into pesonal debt to support an elevated lifestyle. Save like there IS a tomorrow, but one in which you may not have any income for an extended period. When you have amassed a sizeable nestegg, then spend cash (only) on some luxuries. Take care of your own financial situation independently and plan on there being no help from others or the "government" (i.e., We The People). Insure youself well against the unexpected (including umbrella liability insurance). Even folks starting out with nothing can eventually attain sizeable wealth that way. The worst plan killer is poor health - both physical and financial. Everyone has some abiilty to control - and a personal reponsibility for - both types of health.
I follow the Dave Ramsey plan for the most part now, the one where the "status symbol of choice is the paid-off mortgage instead of the BMWs in the driveway". I wish I knew that plan 30 years ago...!
It took me the better part of those 30 years to get into debt (happened quickly) then dig myself back out of it. I had a similar situation with a wife with lifelong medical problems (diabetes and the eventual consequences) but fortunately for me a combination of insurance that did not cause any problems and her early qualification for Medicare took care of most of the associated costs including her very expensive dialysis treatments for end-stage renal failure. I was indeed fortunate in that sense and I am ever grateful for my current situation. But I have seen much worse all around me, like jayn_j describes, and I am trying to protect myself accordingly in case my health turns sour. That includes some active lifestyle changes to get myself in better shape (better diet, daily exercise, routine check-ups) and health insurance to match my current situation (high-deductible CDHP with a tax-deductible HSA to cover the deductibles and incidentals, and a $5 mil. lifetime max.).
My recommendation to any who care to hear it is to NOT go into pesonal debt to support an elevated lifestyle. Save like there IS a tomorrow, but one in which you may not have any income for an extended period. When you have amassed a sizeable nestegg, then spend cash (only) on some luxuries. Take care of your own financial situation independently and plan on there being no help from others or the "government" (i.e., We The People). Insure youself well against the unexpected (including umbrella liability insurance). Even folks starting out with nothing can eventually attain sizeable wealth that way. The worst plan killer is poor health - both physical and financial. Everyone has some abiilty to control - and a personal reponsibility for - both types of health.
I follow the Dave Ramsey plan for the most part now, the one where the "status symbol of choice is the paid-off mortgage instead of the BMWs in the driveway". I wish I knew that plan 30 years ago...!
I think that's where the problem lies. Too many try to do both at the same time, when if you take care of the high money asset first (home mortgage / loans) you then have whatever you've been paying a month for your now paid off mortgage to buy whatever you want in that driveway. Even if it is the punched out Santa / reindeer from Christmas Vacation.
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