Personal Finance Review – Open Enrollment Edition
Can you see into the future? Sometimes I feel like that’s what I’m trying to do when I setup my benefits during open enrollment every year. The worst for me is deciding how much money to put into the flexible spending account and dependent care account.
We’ve never used more money than we put into our FSA, at the end of each year we’re usually scrambling to find things to spend money on to use up our balance. What a crappy system. I always try and estimate based on the previous year’s spending and any known health health procedures or purchases but I never get it right.
Child care is a little easier to estimate since you can approximately plan out the number of days you need it in the next year. Of course things come up, kids or the babysitter gets sick, and you don’t take the kid as often as you thought and so don’t use all the money you’ve set aside.
I still take advantage of the flexible spending account to help reduce taxes but I get frustrated trying to guess how much to put away during open enrollment and then again at the end of the year when I’m trying to use up all my money. Here’s a flexible spending account checklist I just saw by the Mighty Bargain Hunter that could help reduce this frustration and some other articles I liked this week:
–It’s Time for Generation X to Grow Up @ Generation X Finance
–3 Great Money Lessons from My Old Man @ The Digerati Life
–Eliminate Debt: The Ultimate in Lazy Finances @ Lazy Man & Money
–No HSA for Us, for Now @ Suns Financial Diary
–An Interview From Hell @ Money, Matter, & More
–A Bit About Taxes – Understanding Effective Tax Rates For 2007 – Planning For 2008 @ No Credit Needed
–To Gift or Not to Gift: Frugal Gift-Giving Strategies@ Five Cent Nickel
–10 Best Resale Value Cars @ Blueprint for Financial Prosperity
–Index Funds Continue to Be Great Investments @ Free Money Finance
–How Selling On eBay Is Similar To Investing In Stocks @ Money Socket
–Think About the Money You Are Earning Every Hour! @ Moneyning
–Your Money, Your Brain, and Your Happiness @ My Money Blog
–Seven Things You Can Do Right Now (Without Any Capital) To Get Started On Chasing Your Dreams @ The Simple Dollar
Thanks to the Million Dollar Journey for hosting last weeks Personal Finance Carnival!
Short Term Disability Insurance is for Old Married People
True or false? You don’t need short term disability insurance if you’re young and single with no one to support except yourself.
Short Term Disability Insurance, Who Needs It?
I used to have the same opinion. Even after I got married I didn’t elect for short term disability since my wife and I both had jobs so I figured we were safe. Once we had our son my wife left her job so I signed up for short term disability to protect against the event I was unable to work.
Old & Married
As we went through Open Enrollment this last week, a recent college graduate and a new of our team mentioned he didn’t want to pay for the insurance, it was for “old married people” he said. I shared the following story with him.
Young & Foolish
About a year ago, another young, single guy in our group at work had a big party at his house to celebrate finishing his Masters degree. He invited so many people that he stocked up his basement with food and beer in case the supplies upstairs ran out.
Sure enough, partway into the evening the drinks ran dry and he made the trip down to the basement to bring up another keg. Just as he reached the top of the stairs he lost his footing while balancing the heavy container and fell step by step down to the basement floor. To make matters worse, the keg full of beer rolled/clanked down after him, landing on his already injured body.
Injury, Bills, & Debt
Needless to say this guy was in the hospital for a while and couldn’t work for several months. When he made it back he shared how difficult things were for him financially with his medical bills and no paycheck coming in. He didn’t have any kind of disability insurance so he went into a lot of debt and came close to having to sell his home.
Buy or Don’t Buy?
I can’t really advise young, single people to buy short term disability insurance since I didn’t buy it myself when I was in that situation. I can however, share story above and let them make up their minds for themselves.
If you have no debt (still living at home with no car payment) then losing your income for a few months wouldn’t be the end of the world. If, however, you have bills coming in that you can’t pay without your paycheck, short term disability insurance might be worth the relatively low monthly fee. It’s up to you but if you decide against it, remember to be cautious around heavy kegs of beer.
A Socially Responsible Reply to Avoiding Social Security
A reader sent the following response to yesterday’s post on avoiding Social Security payments. I asked them for permission to share it because the email reminded me that Social Security is a safety net for many people and asks some interesting questions about keeping the Social Security program viable:
Reader Response:
Why would your wife forfeit her Social Security contributions? My wife taught for a year under the Missouri Educators’ Retirement System. We converted her contributions and earnings to an IRA when we left the state.
During her last six years as a teacher in South Dakota, and previous years teaching in Kansas and Iowa, she contributed to Social Security, as most public educators do. Her annual Social Security update lists her record of contributions in these states and forecasts her benefits upon retirement, which I fully expect she will someday receive.
Why would you have any more confidence in the survival of Missouri’s retirement system over Social Security? Both can go bust. One in fact might argue that a program that has been around since the late 1930s and has the backing of the Federal Treasury has a more secure future than a relatively new program from a midsized Midwestern state.
It all comes down to political and public will. Will we allow Social Security to fail or embrace obvious remedies toward solvency? Why not raise the cap on payroll taxes past $96000 (maybe even tax investment income), consider raising the retirement age for full benefits, or demand politicians quit raiding the Social Security Trust Fund for other expenditures?
For the past seventy years, Social Security has been an essential part of the safety net for millions of Americans, particularly among the lower and lower middle classes. Its benefits not only help retirees, they assist disabled workers and their families as well as spouses and children of deceased bread winners.
For example, my wife’s grandmother, a former housewife widowed in her mid-sixties, could not have survived into her mid-eighties without her survivor’s monthly Social Security check. There are millions of more just like her today as there will be tomorrow.
Frankly, the question shouldn’t be how do we avoid paying into Social Security but rather can we find the moral and political courage to protect this vital program for future generations.
How to Avoid Paying Into Social Security
What? Is that possible, to avoid Social Security payments? Well, like most things in personal finance the answer is that it depends.
My wife didn’t pay one cent into Social Security for the last seven years of working, better yet, it was all legal and above board. As a state employee, she still contributed to a mandatory state retirement plan but she was exempt from paying into Social Security. Being a teacher does have some benefits : )
Teachers get the summers off and don’t have to pay Social Security, at least in our state anyways. Of course they don’t get paid as well as people in the private sector but the benefits are nice.
One of the things I dislike about the Social Security money coming out of my paycheck is that I’ll likely never see any of it again. When she was working she had the comfort of knowing that all the money she contributed would probably be there for her when we turn old and gray. It’s as if the personal finance fairy came up to us and asked if we wanted to stop throwing money away every month and poof, it was done.
Of course, now that she’s not teaching and working a different part time job, any money she pays into Social Security will automatically be forfeit. I haven’t researched it myself but according to other teachers if you draw from the state retirement plan, any money you did pay into Social Security before or after teaching is forfeit. This really hit one lady who worked in corporate America for 10 years before becoming a career teacher. All her Social Security contributions from that time were down the drain.
Anyhow, if you’d like to avoid paying into Social Security, just become a teacher!
How to Improve Your Performance Review This Year
Below is an email I sent to my team recently giving them the option to have some feedback into their annual performance reviews. In the past, team leaders have filled out all the information but I think each person is their own best advocate so I wanted to hear what each person had to say.
I was a little surprised when one person sent back the form with only three or four sentences filled out. If you have an opportunity similar to this in your job, wouldn’t you put as much detail into it as you could to create the best performance review possible? As I mentioned, you know best all the work you’ve done and things you’ve accomplished at work so be sure to let your boss know those things when it’s time for reviews. Promote yourself to get promoted : )
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John has informed me its time for annual reviews again. I’d like to incorporate your input into the review document so please send me any information you think is relevant, ex: projects you’ve worked on, congratulatory emails, achievements, training you’ve attended, process improvements, etc.
I’ve attached the form that will be used for the appraisal so you can get a feel for what kind of information is documented. Pay particular attention to:
SECTION I
Information that would be helpful here is a list of the projects you’ve worked on/contributed to over the last year.
SECTION II
As you can see off to the right of this section is where ratings are assigned for each Goal Area. The Results column is where specifics are entered to support the rating. Any details you can provide on how you helped work towards those goals during your projects would be useful.
SECTION III
This is similar to SECTION II except it measures the performance factors listed rather than the goals addressed in SECTION II. You can offer your thoughts and examples on how you performed in each of the performance factors.
One of the things that we include in the appraisal are things to work on next year so be sure to include things you’d like to learn, projects you’d like to be involved in, or things you might want to work on next year.
Feedback Optional
Although I won’t necessarily be able to incorporate all the information you send into the document, I wanted to give you the opportunity to provide your input since you’re the most familiar with all of your accomplishments. You don’t have to send me anything if you don’t want to, it’s just a way to allow everyone to participate in the appraisal process.
A Consumers Guide to Holiday Shopping on eBay
As an eBay seller I get periodic newsletters from eBay and just recently received a holiday sales planner in the mail. The newsletter offers eBay sellers a variety of tips on holiday selling success that I thought might be interesting to anyone who is thinking about doing some gift shopping online this year.
Since eBay sellers are competing against all the retailers for your holiday spending many of them really focus on customer service to make themselves stand out and give you a reason to shop with them.
Shipping
The first differentiator that the newsletter focuses on is the ability to make the customer happy with shipping practices. One common problem many buyers face as Christmas approaches is that they need the gift delivered as soon as possible. Make sure you keep your eye out for sellers that will ship within 24 hours after payment is received. If they indicate the express shipping option they should be able to get your purchase there overnight.
Offering free shipping is another way that eBay sellers can stand out and for those that don’t ship for free; they’re often willing to combine multiple purchases into one package to save you shipping costs.
If you buy your brother in Arizona a gift on eBay and would like it sent directly to him, many sellers will ship the package to a different address and some offer to gift wrap it. Even if they don’t advertise it in their listing, it doesn’t hurt to ask. I’ve wrapped and shipped both birthday and Christmas gifts around the country on the request of a buyer even though I didn’t advertise that option.
Return Policy
Another point that eBay drives home in their newsletter is the need to offer a good return policy. According to their consumer research department, 21% of nonbuyers list “lack of return policy” as the reason they buy elsewhere. As more sellers add this feature to be competitive and increase sales, be sure to look for items that offer a money back guarantee. With so many sellers offering quality return policies, there is no reason to buy from someone that doesn’t have one.
Customer Service
One thing that makes eBay sellers different than ordering from a big box retailer is that you’re often dealing directly with the owner of the business on eBay. The eBay newsletter stresses the importance of customer service and responding quickly to customer questions.
As a shopper, if you stick with sellers that have good feedback, you’ll likely get faster and more personal customer service from an eBay seller than you would from a big company. Since you know sellers are willing to go the extra mile to make the sale, don’t hesitate to ask for any extra service when inquiring about an item. All they can say is no.
Make sure you pay attention to the new feedback system that eBay implemented a while ago. It lets you look at different aspects of a seller’s past transactions such as “Item as Described”, “Communication”, “Shipping Time”, and “Shipping & Handling Fees” to help you choose sellers that will offer the customer service you’re looking for.
Quick Sales
Many of us are in a hurry to get our holiday gifts and don’t want to wait 7 days for an auction to end to buy a present. The newsletter suggests that sellers offer more 1-day auction style listings or include the Buy It Now option so shoppers can get the item right away. With these suggestions and the addition of eBay Express, you shouldn’t have to wait several days to make a purchase on eBay.
Gift Cards
eBay is going to be offering $25 and $50 Gift cards this year so if you don’t want to hassle with bidding on an item yourself, you can just give the gift card and let the recipient do the shopping for you : )
Personal Finance Review – Save While You Can Edition
Oh to be young again! As I visited my Alma Mater this weekend to cheer on the soccer team in an important post-season game I couldn’t help but catch some of the conversations of the students around me in the stands.
Their plans and concerns are much the same as mine were ten years ago but much different than mine are now. If only I knew then what I know now. One thing that people in that age group probably can’t fully appreciate yet is the power of time in building your financial security.
If you rack up tons of credit card debt and student loans it will likely take years & years to pay them off. On the other hand, if you ease up on the spending and go heavy on saving and investing when you’re young, the power of compound returns can help you build a nice financial cushion in a decade or two.
If I had any advice to give to the students in those stands, it would be to cut back on the borrowing and save while you can. Don’t put it off until you’re in the “real word”, if you’re smart now the real world will be a nicer place once you reach it. Here are some articles that could help them make those good decisions:
The Sun covers borrowing & debt and the Silicon Valley Blogger talks about credit in emergencies. Lazy Man has a guest post on 7 ways procrastination costs money while Money, Matter, & More realizes David Letterman isn’t so funny after all.
Generation X Finance discusses the Rule of 72 and Free Money Finance gives some pointers on how not to leverage credit cards. Did you know you have secret credit score? Five Cent Nickel fills us in and Blueprint for Financial Prosperity has an interesting take with you are a business, act like one!
No Credit Needed covers maximum retirement contributions and the Mighty Bargain Hunter offers tips on setting up an eBay store. The Simple Dollar asks a question we’ll have to deal with eventually, Should You Give Your Child An Allowance For Doing Chores? Last but not least, Get Rich Slowly presents a translation of Ten Principles of Economics.
Thanks to My Two Dollars for hosting last week’s Carnival of Personal Finance and including my post on people’s ignorance about money.
Who Do You Trust With Your Home, Auto, Family, & Health?
How do you know if your mechanic really changed your oil? Did they work on your alignment, or just say it was fixed? I’m not a very car savvy person so those thoughts crossed my mind today as I picked up our Honda from the shop. Luckily, I’ve found a trustworthy mechanic so I feel comfortable the work was done but it hasn’t always been that way. Whether it’s home repairs, car maintenance, or your own health how do you decide who to trust?
Referrals
As I mentioned above, we found our auto shop through a quality referral several years ago and have been nothing but pleased with their service ever since. Any type of home repairs we’ve had done have been via referral as well. We found plumbers, roofers, drywallers, etc. through recommendations and they’ve all treated us well. As new parents, we had no idea which pediatrician to choose so we asked around and found one that has worked out great. In my opinion, finding a quality professional by recommendation from friends, family, or co-workers is the best way to find someone you can trust.
Third Party Ratings
If you can’t get a referral you can look to services that will help you gauge the legitimacy and quality of a professional. You’ve probably heard of the Better Business Bureau, they review and accredit businesses and help resolve any disputes between the business and their customers. The way I see it, finding a professional accredited by the Better Business Bureau is a good place to start but you wouldn’t want to stop investigating there. Although the seal of approval indicates they are a legitimate business and don’t have an overwhelming number of consumer complaints, it doesn’t speak to their expertise or quality of their service.
If a business checks out as legitimate but you can’t get a direct referral you could try a service similar to Angie’s List that features user reviews on around 250 different types of services. I’ve never used Angie’s List myself but my boss had luck there with a variety of home improvement projects. You do have to pay to belong, which is probably why I never signed up. If you know someone that is a member, you could always have them do a search for you.
Interview Service Providers
Once you’ve narrowed it down to a few different businesses the next step is to interview them in person or over the phone to get a feel for how they interact with customers and ask them some important questions. One place I look for questions to ask is a series run by Smart Money magazine called “10 Things Your X Won’t Tell You”, where X is any number of services you might pay for. Some examples are:
Once you’ve spoken with the service provider and feel comfortable trusting them with your home, auto, or health you should start out small. Don’t have the mechanic do an extensive, expensive job like changing your timing belt. Instead give them a test run with an oil change. If things go well after a few small jobs, you’ll feel much better putting a provider on your list to refurbish your kitchen or perform your laser eye surgery.
Finding someone to trust with your valuable possessions isn’t always easy so get a head start. Go through the research process, you’ll be glad you did when something major goes wrong and you have someone you can trust. What are some other ways you use to find professionals you’re comfortable working with
Time Is Money
What’s the one thing you never seem to have enough of? TIME. Time is a scare resource, you can never make more of it and it’s constantly slipping away. This scarcity and non-renewability is what makes time worth money.
We’re often forced to spend our valuable time on things we don’t deem worthy of our precious minutes and hours but feel are necessary in life. Remember the last time you sat in a traffic jam, spent hours on a ridiculous project at work, filled out mountains of mindless paperwork, or waited on a slow internet connection? As the time ticked by you probably got angry and asked yourself “why am I wasting my time like this”?
I think it’s a good sign if these things upset you, it shows you value your time and will likely look for ways to conserve more of it. No matter what your profession or role in life, your time is worth money, don’t let anyone tell you otherwise. Let’s look at some examples that illustrate how much money time is really worth:
Trading Time for Dollars
If you get paid by the hour its very obvious that time is money. The more hours you work, the more money you make, and vice versa. If you’re a salaried employee you likely get paid the same no matter how many hours you work, which in a way makes your time even more valuable. The more efficient you can be, the more you can get done at work which could translate into promotions and a higher salary. Or looked at another way, the faster you can get done with your work the more time you have for other things in life.
Dollars for Efficiency
Have you ever heard of the popular books “Getting Things Done” or the “7 Habits of Highly Effective People”? Why are these such a hit? These best sellers have made the authors a lot of money because people are willing to pay to learn how to make better use of their time.
The Clock is Ticking
Many people have at least one favorite sports team they like to follow. Think back to a game where they were losing with only seconds left on the clock. How much do you think the coach or players of the losing team would pay just for an extra 5 or 10 minutes to give them a chance to come out on top?
Life is Short
How much do you think a person on their deathbed would pay to have another healthy year of life to live? If it was possible to put a dollar amount on a year of someone’s life I imagine most people would pay whatever it took.
Use Your Time Wisely
Next time find yourself spending time on something you’d rather not be doing ask yourself if it’s really worth the time you’re putting into it. Maybe find an alternate activity, a different way of doing it, or just avoid it all together. Modern life takes a huge toll on our time, what can you do to take back more of your valuable time?
Can You Maintain a Work Life Balance While Carrying a Pager?
What’s one of the first things you want to know when interviewing for a new job? What’s the salary, right? Of course then you move on to how much of your life will you have to spend at work?
You need a job to make some income but you also don’t want to work 80 hour weeks to earn that money so you’re relieved to hear it’s the standard 40 hour week. So what do you do when they bring up the fact that you have to carry a pager, some or all of the time?
The Curse of the Pager
Suddenly your 40 hour week job potentially turned into a 24/7 gig. With the pager they can find you wherever you are and whenever they want. How can you plan out a good work/life balance when you could be summoned into the “twilight zone” of work at any time by a beeping pager?
I’m asking these questions because I’m carrying the pager this week and it went off alerting me to a crisis in the middle of the night. I used to carry it round the clock a few years ago but we’ve switched to an alternating schedule since then. I can barely handle the intrusion on a periodic basis now and remember back to how miserable I was when that ball and chain was permanently attached to my hip.
Emotional & Social Damage
Even if it doesn’t go off, the pager takes a heavy psychological toll on the person carrying it. That fact that it “might” go off keeps people from making plans and enjoying their lives. Sometimes you chance planning something in the evening or on the weekend in hopes you won’t be disturbed but inevitably the pager will scream at you right in the middle of what you’re doing and ruin your plans.
If you want to see someone panic, walk up to their desk, set down the pager, then walk away. They hate to pick it up but they will so they can chase you down and throw it back to you. Even the word pager or discussion of the pager schedule makes people’s heart race with distress and misery.
Are Pagers Worth the Salary?
Some jobs don’t pay any extra for carrying the pager. Mine doesn’t, it’s expected of me as part of my job description. So I wonder, is a job that requires a pager a job worth having? Would you turn down or leave a job if they asked you to carry a pager?
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I'm Ben Edwards and I've been addicted to personal finance since I was 12 years old.
That passion for money has paid off for my family - so in 2006 I founded Money Smart Life to help you afford the life that you want. Read My Story...
