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Surviving Obamacare Round 2

 

By Bob Brooks

September 29, 2014

 

November 15th is fast approaching and is the date that Obamacare Round 2 opens for business. If you need to get insurance, you have 3 short months to get it taken care of. Once February 15th comes and goes you might be out of luck when it comes to getting insurance. Getting organized will help you save the most money and get the right plan for yourself. Here are a few tips.


(1)     Figure out the best way to get on a silver plan

 

In Texas, health insurance plans are rated bronze (the least expensive), silver, or gold (the most expensive plans). For most people, the gold plan is going to be tough to afford. The temptation is to for the cheapest. However, you have to know that the bronze level are HMO’s and doctors are dropping off of these networks right and left. The best value for the money can be found with the silver plans.  

 

(2)       The most important cost to consider is the total out of pocket cost

 

One of the most important numbers you need to know is your maximum liability. If you were to incur medical costs, what is the maximum dollar amount that you would have to pay in a 12 month period? A health crisis can happen when you least expect it. Do you have the funds to cover that cost in the event that it happens? You might want to even pay a little more each month in order to lower that total out of pocket cost.  

 

(3)       Are you paying too much on a group plan?

 

Small Businesses are going to start to feel the pinch this year as group premiums really start to rise. I suspect many small business owners will start to pass more of that cost onto the employees. If your insurance premium cost have increased, it might be less expensive to purchase an individual policy. Plus, you might qualify for subsidy which brings the cost down even more.

 

(4)  Take the mandate to get insurance seriously

 

The government mandate states that everyone needs to be covered by health insurance unless you qualify for one of the exemptions. If you ignore the government mandate, you risk facing a pretty stiff penalty.

For families the 2014 health insurance non-compliance penalty is capped at the greater of 285 per family or 1% of income. In 2015 it rises to the greater of $975 or 2 percent of income. And by 2016, it will jump to the greater of $2,085 per family or 2.5% of income.

 

Prior to the Affordable Care Act (Obamacare) went into effect, consumers had the luxury of casually paying attention to healthcare policies and costs. That has all changed with premiums and medical expenses climbing. Going forward, healthcare expenses will have to be managed.    

 

 
The 5 Key Elements of Success When it Comes to Investing

By Bob Brooks

September 23, 2014

 

Through 22 years of managing money, I have learned many investing lessons.  Some lessons were learned from observation.  While many others through the school of hard knocks.  I have come to the conclusions that your investment game plan and or strategy needs to have elements of these 5 characteristics to it.  The strategy influences the decision making.  The 5 principles influence the strategy.

(1)    Have a Specific Means to an End

Why do you invest into a 401 K plan?  Most people would answer for retirement.  My response is how will you know when you get there?  Retirement is not specific enough.  Without a specific target, you will never know if you are track and if and when to make adjustments.  Define specifically what your specific means to an end looks like.  

(2)   Track your progress

Even if you have specific goals, it is critical to know if you are on track.  Further, it is tough to make good decisions unless you know if you are on target or not.  How do you do that?  I created a benchmarking system to achieve that goal.  With a benchmarking system, you will know where you need to be by the end of each year.  It will tell you how much you are ahead, behind, or right on the mark.  It is impossible to be a good manager of risk without knowing this key information.  Goals should be a primary determinant of how much risk to take at any given time.  Sadly, the vast majority of people investing for retirement skip this key step.

(3)   Have a Plan A and a Plan B

Everyone has a plan A.  Invest your money and hopefully watch it grow.  However, what if the conditions in the market, prevent that from happening?  What if we are in a period where the risk of extreme loss is keep you from staying on target?  That is when you implement Plan B versus crossing your fingers and hoping it works out.  Just like in 1 and 2 above, the vast majority of investors don’t have a Plan B.  That can certainly be a life saver in a tough market.

(4)    Investing is step 1….Managing is step 2

I have found that most investors feels like the process of investing is complete once the money is invested.  The reality is that it has only started.  This is where the most important part of the process starts – managing it for risk.  The formula is to invest into a diversified group of effective investments and then to carefully manage them for risk.  It is a key element that is not always considered.    

(5)    Don’t Forget to Include God in the Process

Stewardship is not a responsibility that was ever designed to be carried out alone.  God wants to be included in your decision making.  It is a little tough to make a mistake if you are making it with God’s peace and the intent of only being in His Will.  The only way to get God’s peace is through prayer and studying His Word.   Now don’t get me wrong.  Investment success is not the reason why you want to include God in the process. Prudent Stewardship and obedience are the reasons why you want to include God in the process.

There are a number of ways to grow money.  All of them have pros and cons and none of them are perfect.  That makes the effectiveness of decision making much more crucial.  Following those 5 principles will increase the effectiveness of your decision making no matter what type of strategy you are following. 

 

One thing for sure is that you don’t have time to waste.  If you want to make sure you are on the right track with your investments, send me an email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it  or call me at 972-386-0384.    When I am not on the radio or writing for the site, I am working with clients and managing money and would love to hear about your situation.

 

 
Renting instead of Buying Toys?

By Bob Brooks

September 22, 2014

 

Like it or not, Christmas is around the corner and the toy buying season is upon us.  A recent survey suggests that parents are preparing to spend over $20 billion on toys for the children between now and the end of the year.  The average American family will spend an approximate $7,620 on toys annually.  Here is the more startling statistic of that survey.  An approximate $5,182 per household will toys that are discarded by children following one month of purchase this year.

 

This is probably of no surprise to many of you.  I know that at your house I am amazed as to how many toys of all types are received at Christmas, birthdays, etc.  and end up being given away.  So, it begs the questions – Is there a better way to go about getting toys for your children?  A recent article in the New York Times calls it the Net-Flex Economy.  This is a trend emerging where people are renting items that they normally would buy.   There are all types of internet start-up companies coming on-line that are facilitating this growing trend.  The New York  Times article points out that this trend has emerged as a result of the financial crisis and the need to save money.  Of course, technology makes this much easier to do what about renting toys versus buying them.  One such company, www.pley.com, thinks it is a great concept.   

 

This company actually rents toys for kids.  Pley.com allows members to rent a different LEGO set each month based on their customer’s preference.  Each set is sanitized before being sent out, and there no fee for missing a few pieces (as if they are going to count).  Subscriptions range from a very affordable $15 to $39 per month.  When you think about it, the concept makes sense.  Think of the millions of Lego pieces laying in millions of bins in households all over America.   

 

 
The One Big Reason Why We are All Probably Under-Saved


By Bob Brooks

September 15, 2014

Well, they call it an emergency for a reason. It is the unexpected expense you didn’t see coming. I think that there are emergencies that you feel pretty certain could happen and then there are the emergencies that you think will never happen in a million years.   It is the latter that can sneak up on you…especially since the costs have nowhere else to go but up.

Medical expenses are one of those things most people don’t see coming and it is the one item we probably need to be thinking more about. Health expenses and health insurance is going to be an ever increasing expense. Unfortunately, health insurance might get so expensive that we are forced to have higher deductibles and higher out of pocket expenses. These are expenses that are rarely considered when calculating an emergency account. If you don’t have the emergency account, the credit card is the next best option.

A recent survey just released by bankrate.com had some interesting detail on medical debt.

“One in four people say they now owe more in medical debt than they have saved in an emergency fund. Among people who make less than $30,000 annually, 44 percent revealed that their medical debt exceeds their emergency savings fund. But even in higher-earning groups, of up to $75,000 annually, about one in four people say they're in that position, according to the Health Insurance Pulse survey.

In contrast, just 6 percent of people who make more than $75,000 each year said their medical debt is more than what they have saved up for emergencies.

And a majority of all respondents—55 percent—reported that they are either "very" or "somewhat" worried about being overwhelmed by medical debt in the future.”

Take a hard look at how much you have in that emergency account. Then consider what a major illness would set you back. Then….reprioritize where you are saving money until you get that potential liability covered.

 
Why Stocks are Dangerous When Everyone Loves Them

By Bob Brooks

September 12, 2014

 

If I told you that it has been almost 30 years since we have had this few people who are negative about the market, would you think that is positive or negative?  

If everyone was positive, common sense would say that this is good news for the stock market. Unfortunately, common sense doesn’t work on Wall Street.

In 1954, Humphrey B. O’Neil wrote an incredible book called the Art of Contrarian Thinking. This is an investment book that every investor should read. It is timeless.

His famous quote from the book was that “when everyone thinks alike everyone is likely to be wrong.”

It has also been referred to as the “crowd effect.” Investors will, as a crowd, jump on a bandwagon thinking that they will make a ton of money by investing in a certain investment. We saw it in real estate, internet stocks, gold, etc. This investment crowd effect even dates back to the 1600’s when people thought investing in tulips was going to make a person rich. This is just plain and simple – human nature.

When you see this type of phenomenon where everyone is doing the same thing, it usually ends up badly. Think about how much money was lost in internet stocks and real estate.

We are probably not in a bubble type environment today in the stock market. However, we probably are in an overly optimistic bubble for sure. It is tough to find many who don’t think that the stock market is a “can’t miss” opportunity.

A recent stat shows optimism is out of control amongst investment letter writers. Now this is historically a pretty balanced group of people…except for now. Negativity amongst investment newsletter writers fell to 13.3%. The last time negativity or bearishness was this low…1987. What happened in 1987? The second largest stock market crash on record.

When optimism gets this out of balance, things tend to go the opposite of what everyone thinks is true. This is just another piece of the risk puzzle to keep mind when you are investing in stocks.  

If you want your investments evaluated for risk, email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 
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