Just yesterday I was informed by Fidelity Investments that the IRS granted them an extension to the Feb 15th mailing deadline.  Fidelity made this request due to delays from certain third-parties, causing tax information to not being available yet.  The deadline extension was approved by the IRS and Fidelity says they are committed to mailing the documents by the end of February.

The good news is that this extension will likely reduce the number of corrected 1099′s that will be sent out in March or later.

If a public official did not use a blind trust for his or her investments, the only other way to avoid conflicts of interest would be to simply not invest in anything.  They would be limited to owning bank CD’s or treasury bills, etc.  Blind trusts help these individuals avoid being accused by others of conflicts of interest, and also avoid being tempted to take advantage of information they may have.  It’s called a blind trust because the beneficiary cannot see what is held inside the trust.

A blind trust is not just for someone who is super rich or wealthy.  Anyone who is a public official, or who is in a sensitive public position could protect themselves from scrutiny by using a blind trust.  In the trust they would be able to specify the general perameters for investing such as asset allocation (the mix of stocks, bonds and cash), and the timeframe for the investment to be used.  But beyond that, the trustee will manage the particular investments, and would be paid for their services.

Many people wonder if a hand-written will is valid.

The subject of the hand-written will comes up a lot in discussions with financial planning clients and others.  Probably because it’s one of the basic things we financial planners always ask about…”do you have a will?”  And it’s also one of the most common things missing from a person’s critical documents.  The majority of Americans don’t have one today.

I’ve written about the importance of a will and other basic estate planning documents before. Click here to read a previous post on this topic. 

So this came up again today with a client who has a friend who has never written a will.  The friend is in her 80′s and feels overwhelmed about the thought of going to an attorney to draft a legal document.  I can certainly understand why a lot of people don’t want to do something that is related to them dying.  It’s basically admitting to yourself and others that you’re going to die one day, which not many people enjoy thinking about.  (The same feeling you get when buying life insurance.)

My client asked me if her friend could just write something down on a piece of paper, and would that be valid.  I knew that all states recognize a will that is hand-written, as long as it’s witnessed, or notorized.  But what if it’s not witnessed or notorized?  I found out that this type of will is known as a HOLOGRAPHIC will.  No, that doesn’t mean it’s projected into the air so you can walk through it.

Black’s Law dictionary defines a HOLOGRAPHIC will as:  “a Will written entirely by the testator in his or her own handwriting and is not witnessed.”

Are hand-written or holographic wills recognized in your state?

Each state has it’s own rules about the type’s of wills it will recognize.  I found the list below on www.lawchek.com .  I am not an attorney, and I don’t give legal advice, and I strongly suggest that you check with your home state to verify their statutes.  But here’s what I found:

ALABAMA
A Holographic Will is not recognized as a valid Will since the state law requires that every Will be witnessed by at least two witnesses.

ALASKA
Alaska recognizes a Holographic Will as a valid Will, whether witnessed or not, if the signature and material provisions of the Will are in the testator’s handwriting.  (Code Section 13.11.160)

ARIZONA
A Holographic Will is recognized as a valid Will, whether or not it is witnessed, if the material parts of the Will are in the handwriting of the testator and it is signed by the testator. (Section 14-2503)

ARKANSAS
A Holographic Will is recognized as a valid Will where the entire Will and signature are in the handwriting of the testator. It must be established by 3 disinterested witnesses that the handwriting and signature are, in fact, that of the testator. (Section 28-25-104)

CALIFORNIA
A Holographic Will is recognized as a valid Will, whether or not witnessed, as long as the signature and material portions of the Will are in the testator’s own handwriting. A Holographic Will may be held to be invalid if it does not state the date of the execution and the date cannot be proven. A Holographic Will is also considered invalid if the testator lacked the required mental capacity to execute a Will. (Probate Code Section 6111)

COLORADO
A Holographic Will is recognized as valid, whether or not witnessed, if the signature and the material parts of the Will are in the handwriting of the testator.  (Section 15-11-502) A document that appears to have been intended to be a Will is also considered valid if it can be established by clear and convincing evidence that the decedent intended the document to be a Will. (Section 15-11-503)

CONNECTICUT
Connecticut does not recognize a Holographic Will executed in its state.  However, a Holographic Will that was properly executed in a state which allows such Wills is valid.

DELAWARE
A Holographic Will is not recognized as a valid Will by this state because it does not meet the requirements the state has set forth for executing a Will. (Section 12-202)

FLORIDA
Florida does not recognize a Holographic Will as a valid Will. (Section 732.502)

GEORGIA
A Holographic Will is not recognized as a valid Will in the state of Georgia.

HAWAII
Holographic Wills are not recognized as valid Wills in this state. If a holographic Will was properly executed in a state recognizing their validity, then such a Will may be admitted to probate in Hawaii. (Section 560:3-409)

IDAHO
Idaho does recognize a Holographic Will, whether witnessed or not, as long as the signature and material provisions are in the handwriting of the testator. (Section 15-2-503)

ILLINOIS
A Holographic Will is not recognized as a valid Will in this state.

INDIANA
Indiana does not have any state statutes which provide for Holographic Wills.

IOWA
Iowa does not recognize a Holographic Will because they are not executed in accordance with the laws on executing Wills.

KANSAS
Kansas does not recognize a Holographic Will as a valid Will.

KENTUCKY
Kentucky does recognize a Holographic Will as a valid Will. (Section 394.040)

LOUISIANA
Louisiana does recognize a Holographic Will if it is written by the testator and dated and signed by the testator. No other formalities are required. (Section 1588)

MAINE
Maine does recognize a Holographic Will, whether witnessed or not, as long as the signature and material provisions are in the handwriting of the testator. (Section 2-503)

MARYLAND
The Holographic Will recognized as a valid Will must be made by a person serving in the U.S. Armed Forces and made outside of the United States. However, this Will is considered void one year after discharge from the Armed Forces. (Section 4-103)

MASSACHUSETTS
Massachusetts does not recognize a Holographic Will as a valid Will.

MICHIGAN
Michigan will recognize a Holographic Will as valid if it is dated and the testator signed at the end of the Will. Material provisions of the Will must be in the testator’s handwriting. (Section 700.123)

MINNESOTA
Minnesota does not recognize a Holographic Will.

MISSISSIPPI
Mississippi does recognize a Holographic Will as a valid Will. No witnesses are required. (Section 91-5-1)

MISSOURI
Missouri state law makes no reference to Holographic Wills.

MONTANA
Montana does recognize a Holographic Will as a valid Will, whether or not witnessed, if the signature and material provisions are in the handwriting of the testator.

NEBRASKA
Nebraska does recognize a Holographic Will as a valid Will, however, it must have some indication of the date, either written or by some external evidence. If the holographic Will is the only writing found, it will be considered valid. (Section 30-2328)

NEVADA
Nevada does recognize a Holographic Will as a valid Will if the document is entirely written, dated and signed in the testator’s handwriting. There is no particular form required other than it be entirely written in the hand of the testator. It can be made either within or outside of Nevada and there is no requirement that it be witnessed. (Section 133.030,090,190)

NEW HAMPSHIRE
New Hampshire does not recognize a Holographic Will as a valid Will.

NEW JERSEY
New Jersey recognizes a Holographic Will as a valid Will, whether or not it is witnessed, if the signature and material provisions are in the handwriting of the testator.  (Title 3B Chapter 3 Section 3)

NEW MEXICO
New Mexico does not recognize a Holographic Will as a valid Will.

NEW YORK
A Holographic Will is considered a valid Will only in the limited circumstance where it is made by certain members of the U.S. armed forces while serving in a conflict or by another person who serves with or accompanies the member of the armed forces.  Such a Will must be entirely in the handwriting of the testator to be valid. Such a Will becomes invalid after 1 year after he or she ceases serving with the armed forces. (NY Law EPTA Section 3-2.2)

NORTH CAROLINA
North Carolina does recognize a Holographic Will as a valid Will as long as it is written entirely in the handwriting of the testator. Some immaterial printed matter will not invalidate the Will. This Will must be signed by the testator in his or her own handwriting and no witnesses are necessary. The Will must also have been found after the testator’s death, among the valuables, in a safe deposit box, or with a person, where it appears it was intended to be kept for safe keeping. (Section 31-3.4) Testimony is required to admit the Will into probate to prove the above requirements.

NORTH DAKOTA
A Will which does not comply with the formal Will execution provisions will be considered a valid Will, whether or not witnessed, if the signature and material provisions are in the handwriting of the testator. (Uniform probate code section 2-503)

OHIO
Ohio does not recognize a Holographic Will as a valid Will. A Will must be executed and witnessed in conformity with Section 2107.03.

OKLAHOMA
Oklahoma does recognize a Holographic Will as a valid Will. (Section 84-54)

OREGON
Oregon does not recognize a Holographic Will as a valid Will.

PENNSYLVANIA
Pennsylvania does recognize a Holographic Will as a valid Will.

RHODE ISLAND
Rhode Island does not recognize a Holographic Will as a valid Will.

SOUTH CAROLINA
South Carolina does not recognize a Holographic Will as a valid Will. However, certain exceptions are made for Holographic Wills which are validly executed in a state which allows such Wills, or when an out-of-state probate proceeding is involved.  (Section 62-2-303, 408, 502, 505)

SOUTH DAKOTA
South Dakota does recognize a Holographic Will as a valid Will, whether it is made within or out of the state and whether or not it is witnessed, if the signature and material portions are in the testator’s handwriting. Intent that the document is the testator’s Will can be established by extrinsic evidence. (Section 29A-2-502)

TENNESSEE
Tennessee recognizes a Holographic Will as a valid Will. The Will is valid if it is in the testator’s handwriting, whether witnessed or not, but the testator’s handwriting must be proven by two witnesses. (Section 32-1-105)

TEXAS
Texas recognizes a Holographic Will as a valid Will. The Will must be entirely written by the testator, but is not required to be witnessed. It may be proven in one of two ways: The testator may attach an affidavit stating that this written instrument is his or her last Will and that he or she was competent to make the Will and that the Will has not been revoked. (Probate Code Section 60) If the testator does not self-prove the Will, then at the time of death it must be proved by the testimony of two witnesses as to the handwriting of the testator. (Probate Code Section 84)

UTAH
Utah recognizes a Holographic Will as a valid Will, whether or not it is witnessed, as long as the signature and material provisions of the Will are in the handwriting of the testator. (Section 75-2-503)

VERMONT
Vermont does not recognize a Holographic Will as a valid Will since it does not meet the execution requirements set forth by state law. (Section 14-5)

VIRGINIA
Virginia recognizes a Holographic Will as a valid Will as long as the Will is written entirely in the handwriting of the testator. It is not necessary that it be acknowledged or witnessed. At time of death, the proof of handwriting must be established by at least two disinterested witnesses. (Section 64.1-49)

WASHINGTON
Washington does not recognize a Holographic Will as a valid Will since it is not executed according to the formalities set forth by state law. However, the state may recognize a Holographic Will that was executed in states where it was deemed legally executed at the time. (Section 11.12.020)

WEST VIRGINIA
West Virginia does recognize a Holographic Will as a valid Will. The Will must be entirely in the writing of the testator and be signed by the testator. The Will must evidence an intent that the document is to act as a Will, and the signature must be intended as a signature to a Will. No acknowledgment or witnesses are necessary.  (Ch. 41, Art. 1, Section 3)

WISCONSIN
Wisconsin does not recognize a Holographic Will because it is not executed according to state law. However, a Holographic Will executed in a state where it was considered valid at the time will be recognized. (Section 853.05)

WYOMING
Wyoming does recognize a Holographic Will as a valid Will and there is no requirement that it be witnessed. (Section 2-6-113)

If a state does recognize a holographic will, they will probably require that at least two people can verify that the handwriting is that of the deceased person.

You can restart social security benefits to increase your monthly pay.

Many people choose to begin recieving their social security benefits at age 62, the earliest age possible. When you do this, you receive a reduced monthly benefit for the rest of your life. This is often a great idea, and I often recommend it to my clients if: 1. They could use the extra income to help them meet retirement expenses. Or 2. They have a family history of not living well beyond life expectancy. By waiting till full retirement age to start receiving your social security benefits, you get more money per month.

In some cases, it makes sense for you to restart social security benefits and thereby increase your monthly income. Doing this requires that you first pay back all of the social security benefits that you’ve received up to that point. Some experts say that doing this can increase your monthly benefits by as much as 76%. Here’s what you have to do to make this happen:

Consult your CPA or Financial Planner

You need to meet with your CPA or personal financial planner to help you make this decision. You will need to run some calculations to see if it makes sense for you to pay back a big chunk of money in exchange for a higher monthly benefit. This monthly benefit will be increased over time with inflation. So that’s a good thing. Also, the government doesn’t charge you interest on the amount you’re paying back, another good thing.

Consider the financial impact

Consider your general health and life expectancy before restarting social security.

Having to pay back all of your social security benefits all at once could be a huge amount of money. For example: let’s say you started your social security benefits at age 62 and you’re getting $1100 per month. If you’re not 66, you would need to pay back $52,800. Again, you don’t have to pay back any interest on this amount, so it’s like you’ve had an interest free loan from the government.

File the appropriate form

Now you need to file SSA form form 521, “Request for Withdrawal of Application.” Send the form, along with the the check for the full amount of benefits received, to the Social Security Administration. Once the form is processed, you’ll begin receiving the benefits you’re entitled to at your present age. For example, if you were born between 1943 and 1954, your full retirement age is 66. For each month before full retirement you began taking benefits, they are reduced by .75%. If you began benefits at age 62, you receive 75% of your full benefits. For each month you delay benefits beyond full retirement age, they are increased by .75%. If you restart social security at age 70 in this scenario, you receive 132% of your full benefits.

A word of caution

A few things you need to consider, and your personal financial planner should address this with you, is your life expectancy. If your family has a history of people living to or beyond life expectancy, then this strategy might make more sense for you. If you pay back all this money, and then you don’t live long enough to recoup your outlay of cash, then restarting social security was not a good deal. None of us know how long we’re going to live, but your family history should be a pretty good indicator of what is likely to happen with you.

The other consideration related to your health is that you may end up needing that lump sum of money for health care or long-term care needs. The last thing you want to have happen is you increase your income by restarting social security benefits, but then you run out of money early because you tied it up. Make sure you and your financial advisor consider all the options before electing to do this.

Fear of inflation

Many investors have been moving their assets into gold for some time now based on a fear of looming inflation.  Historically, when inflation rises and your dollar buys you less and less, gold will become more valuable.  Many people have been expecting infation to rear its ugly head for some time, but it hasn’t happened yet.  For inflation to occur, you normally need to have housing prices on the rise, household income on the rise, and commodity prices on the rise.  Currently we only have commodity prices rising.  If these three factors hold true, it could be another year or two before we get some real inflation.  Fear of inflation is one reason why the price of gold is so high.

Currency devaluation

If paper money is being devalued (it’s not worth as much as it used to be), then gold prices would be forced higher.  This is happening all over the world right now.  Many countries are devaluing their own currencies, not just the United States.  Here in the U.S., our dollar has been declining in value for some time (although right now it is on the rise).  Some experts believe that this has made it cheaper for people in other countries to invest their money into gold.  People seem to have lost faith in dollar based assets, and that’s another reason why the price of gold is so high.  Buying gold is similar to buying insurance on your house.  You own your house because you believe that it’s a good investment in the long run.  But you buy insurance on it just in case something bad happens to it.  Owning gold does the same thing for your U.S. dollar based portfolio.

Overall instability

Most people are pretty uneasy right now about the instability of our political situation, our economy, and our interest rates.  This nervousness is causing a lot of investors to place part of their assets into gold-based investments.  If things ever do settle down and become more stable, you would expect investors to start to back away from gold.  When that happens, people will no longer be asking, “Why is the price of gold so high?”

How can I invest in gold?

If you don’t already have a part of your portfolio in gold, it would probably be a good idea to look for an opportunity to get some.  Some experts say that “the trend is your friend”.  In other words, buying something that is on its way up will help you achieve better than average returns.  But many studies show that buying near a high can be a recipe for disaster.  Prices are very high right now, and I wouldn’t be surprised at all to see a pullback in the price of gold soon.  When the price of gold dips down, that might be a good time to get some exposure.

GLD – This is an exchange traded fund, or ETF that gives you good exposure to the price of gold.  You can buy and sell shares of this fund (symbol GLD) through any brokerage firm, and the only trading costs are the same commissions you would pay to buy any other stock.  

SPDR Gold Shares offer investors an innovative, relatively cost efficient and secure way to access the gold market. SPDR Gold Shares are intended to offer investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that interest through the trading of a security on a regulated stock exchange. The introduction of SPDR Gold Shares was intended to lower many of the barriers, such as access, custody, and transaction costs, that have prevented some investors from investing in gold.

 SPDR Gold Shares represent fractional, undivided beneficial ownership interests in the Trust, the sole assets of which are gold bullion, and, from time to time, cash. SPDR Gold Shares are intended to lower a large number of the barriers preventing investors from using gold as an asset allocation and trading tool. These barriers have included the logistics of buying, storing and insuring gold. In addition, certain pension funds and mutual funds do not or cannot hold physical commodities, such as gold, or the derivatives.

GDX – Market Vectors Gold Miners ETF.  This is another ETF that will give you exposure to the price of gold, without actually owning gold bullion.  The investment seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the AMEX Gold Miners index. The fund generally normally invests at least 80% of its total assets in common stocks and American depositary receipts of companies involved in the gold mining industry. The fund is nondiversified.

Hopefully this article has helped answer the question, “why is the price of gold so high?”  Additionally, I’ve tried to give you a few ideas about how to invest in gold.  The question I have not addressed is, “How much gold should I own?”  This question can only be answered after evaluating an investors overall situation because every person is unique.  Talk to your financial advisor or give us a call at 1-866-983-4222 for a complimentary review of your portfolio.  Financial planning is about diversification, and looking at the big picture.  Only after looking at a client’s total situation could a financial planner make a recommendation like that.

If you shave your own hair at home vs. going to the hair salon/barber each month, you’ll save at least $15 (assuming your a man).  Add to that the cost of shampoo, gel, hair spray, mouse, hair dye or whatever other hair products you use, that’s another $5.  So if you save an extra $20 per month for 20 years, and it grows at 7% per year, that adds up to $10, 418.  That’s nothing to laugh at, even if you do have a funny shaped noggin.

So maybe the shaved head is not for you (although your wife might like it).  But there are tons of little ways we can all save extra each month.  And little bits of savings add up to big numbers over time.  Here’s a chart showing what you could accumulate if you save these amounts, and grow them at 7% per year:

HTML Tables

OK, so I don’t REALLY think that everyone should shave their heads.  I just wanted to get your attention.  What I do think is that everyone can find one or two ways to save a little extra money each month.  And whether you put it towards retirement, or college, or that ski condo you’ve always wanted, you’ll be glad you made the sacrifice in the end.  It’s never too late to start saving!

But in case you are interested in joining the hair-free ranks, there are some cool specialty razors out there like the HeadBlade from www.headblade.com

If you have a money saving tip that others might enjoy, please submit it below in the Reply section.

Have a great day!

Emotional Investing

Investing according to your gut is one of the most dangerous things you can do.  When the market it way up and you see double or triple digit returns, your gut tells you to buy.  When the market is tanking into the abyss and you’re losing lots of money, your guts tells you to sell.  So if you follow your gut, you’re buying HIGH and selling LOW!  I can’t tell you how many hundreds of people have told me they do just that!  A money manager can take some of the emotions out of the process, or talk you away from the ledge, and hopefully avoid this common trap.

Chasing Returns

This is really related to emotional investing, but it happens more often.  You look at your holdings and the Morningstar reports on the funds you own.  You see that you have some dogs (1, 2, or 3-star funds), and you decide it would be better to buy some 5-star funds.  So you sell your dogs and buy some hot funds that have been way up in the last year.  Seems like the right thing to do, right?  Wrong.  What you’re really doing here is once again, selling LOW and buying HIGH.  You’re selling something that has underperformed the market, and buying something that is already way up and has been outperforming the market.  Things go in cylces.  A money manager can help you construct an all-weather portfolio.

The Test

I call this the money management T-I-R-E-D test, to help you decide if you’re tired of managing your own money.

T – Time.  Do you have the time it takes to properly manage your money?  Doing investment research, evaluating your holdings, calculating rebalancing changes, making the changes, keeping up with tax law changes, updating beneficiaries and account information, reviewing your insurance holdings…it all takes a lot of time, and time is money.

I – Inclination.  Do you really enjoy managing your investments?  Most people would rather eat shards of broken glass than read a mutual fund prospectus.  You really can’t blame them, they are written by attorneys.  But even if you do enjoy researching and reading about investment products, trends and strategies, is it really what you want to do with your free time?  Or would you rather be playing golf, working in the garden, watching your kid play a sport, or spending time with the grandkids?  No matter what it is, if you don’t like doing it, you probably won’t do it.  And your investments are something you really should not ignore.

R – Research.  Do you feel that you have access to the kinds of research that you need to manage your money most effectively?  Reports from Morningstar, Lipper, Standard & Poors can be costly and not easy to come by.  Professional money managers also have access get on conference calls with best mutual fund managers and ask them questions about thier funds.  Having all the right information can make a world of difference.

E – Expertise.  Do you have enough expertise in the investment world to effectively manage your money?  Everyone has an area of expertise, and it makes sense to leverage your own, and others areas of expertise.  You wouldn’t hire a plumber to fix your car.  Nor would you pay your dentist to put a pool in your backyard.  A good professional money manager will easily pay for himself with the money he can save you in taxes, fees, penalties, not to mention the extra returns he can put in your portfolio.

D – Discipline.  Do you have the discipline it takes to strategically manage your own money and stick to a plan?  This one relates in part to the emotional investing discussed earlier.  It’s easy to stick to a plan when the market it up.  But when things are crazy, having a level-headed money manager to stand by you and help you makes all the difference.  To become financially independant, it takes time  and the dedication to follow a disciplined strategy.  Having someone to keep you accountable and make sure you stick to your plan can really help.

If you answered NO to any of these questions, then it would be good idea for you to find a money manager whom you could work well with.  The annual fee that you would pay them to help you with this most important task will be well worth it.  I have found in my 15+ years of doing personal financial planning, that I can usually increase a clients returns by at least 2-3% even after my fee comes out.  But the best part for the client is that they no longer have to worry about it at all.

While going to get a burger and shake may not seem like a big deal, the stakes get much higher as children grow older and parents start making financial gifts, or giving financial assistance to them.

In personal financial planning, reducing a person’s estate is often a concern.  Many people who are in a position to do so, will make financial gifts to their children for estate planning purposes.  This is usually done when someone is trying to reduce their taxable estate, or just to let their kids enjoy some of their inheritance early.  Additionally, parents will often give financial assistance to children when there is a need.  While there is nothing wrong with giving money to your children, you need to be very careful in how you do this so that nobody screams, “That’s not fair!”

Equal gifts, but not equal needs

Every family that has adult children knows what it’s like to have at least one child who has a greater financial need than the others.  Parents are often naturally inclined to want to help this child out a little more than the others.  This is where it can get a little sticky.  If a parent gives money to one child and not to the others, they take a chance of driving a wedge into the family.  While you may think you are doing that child a favor, (and you are) your other children may not feel the same way about it when they find out.  I have seen several situations like this where siblings who were better off financially felt left out, cheated, and maybe even less loved, because their parents didn’t give gifts equally.  I’ve seen this drive a wedge between siblings, and between parents and children.

Leaving more to one child

I’ve also seen situations where parents left more of their estate to one child when they passed away.  Again, this was a case where the parent felt that this particular child had a greater financial need and would benefit more from the larger inheritance.  While this may have been true, the child who inherited less was left to feel left out and somehow less loved.  Even though this is done with good intentions, it can really tear a family apart.  The more well-off child resented the sibling that was left with a bigger inheritance, and at this point the two have not spoken to each other in about 10 years.

Is there a better way?

Only you can decide the best way to handle these situations.  But I have seen some different things that people have done to try and make .  In one situation, a child was having some financial difficulties and the parent wanted to help them out.  They made an agreement that any money the parent gave them now would be deducted from their final inheritance when the parent passed away.  I thought that this was a fair way to help the child out now, but still be fair to the other children in the family.  I have seen other families require the child to pay back the money over time, but with little or no interest.  This method helps the child out now and allows them pay the money back when they get back on their feet.

There are a lot of ways to deal with these situations that allow you to help out a child in need.  While it’s easy to think, “My other kids don’t need this money”, you may not be doing them a favor in the long run.  You may in fact be setting them up for family contention down the road if you don’t give equally to all of your children.  Even if they don’t need the money as badly, if another child gets more, there could easily be feelings of resentment and bitterness towards the other child, and towards you.  No one wants to be remembered that way.

Many people don’t realize that you can, and should do the same thing for healthcare related services and low cost health insurance.   The reason most people don’t think of this is that for most services you receive, you just pay a co-pay and that’s it.   Once you pay your co-pay, you don’t really care what it costs, and neither does the doctor.   In fact, the doctor has more than one incentive to perform as many tests and scans as possible.  The more he does, the less likely he is to get sued by you, and the more money he makes.  However, depending on where you receive the service and how it’s billed, may be covered by a co-pay, or it may go towards your deductible (which means you’ll have to pay for it out-of-pocket).

Let me give you a recent PERSONAL example of this.

My wife was told by her doctor that she needed to go have a CT scan done.   The doctor scheduled the appointment for her at an imaging center owned by the same hospital network that he worked for.   Now this was after we had told him that we wanted to have to test covered by a co-pay if possible, and not have it go towards our deductible.   We also told him that she had previously had some imaging done at a certain center where we knew it was covered by a co-pay.   We thought that was the place he had scheduled the appointment. When we arrived at the imaging center for her appointment, she was not on the schedule. They made some phone calls and found out that she was scheduled at another nearby imaging center, the one owned by the same hospital network that my wife’s doctor was in.   So we went over there and spoke to them, and found out that if she had the scan done there, it would go towards her deductible and would cost us about $2,000 out-of-pocket.   But if she had the scan done at the other imaging center that was not part of that hospital network, all it would cost us is a $15 co-pay.  What a difference!

This is why I am writing a blog post about saving money on healthcare on this personal financial planning site.   Health care costs have become a huge part of a person’s finances, and it’s very important for everyone to understand how to save money on these services. The more you can save on healthcare and on low cost health insurance, the more you’ll have to pay off debt or invest for you future retirement.  Healthcare professionals and hospitals are running businesses, and are trying to make them as profitable as possible.  This recession is hurting the healthcare industry just like everyone else.   Because of this, you really should not assume that your doctor is going to always act in your financial best interest. You need to take responsibility to do your homework and shop around to make sure you’re getting the best possible price for the service you will receive.

The fact that the same service could cost your either $2,000 or $15 depending on where you get it is ridiculous and should tell you that there is a lot of work to be done to straighten out our healthcare system.  That would take a whole other web site to cover that topic.  Maybe doctors need to start being worried about getting sued for charging a patient $2,000 for a scan when it could have been done for a $15 co-pay.

1.  Admit that you have a problem and commit to fixing it.  This is the first step in becoming successful at paying off debt.  Until you admit that this is a problem for you, you will never be able to change your behavior and habits.  This is no different than any other habit a person may want to change, like sleeping too late, eating too much, being late to appointments.  It may not be easy, but you can learn to do it and become very good at it.

2.  Stop debt spending.  Before you can start paying off debt, you first need to stop accumulating new debt.  To help yourself to do this, you need to make it difficult for you to debt spend.  Many people who have done this in the past have cut up credit cards that they don’t really need so they won’t use them any more.  Of course you probably need to keep at least one card active, but do you really need more than that?  I have also heard of people freezing the one card that they can use in a block of ice in the freezer at home.  This way, if they really need it, they can thaw it out and use it.  But it’s not in their wallet, easy to use any time they want it.  In a sense you are stopping the bleeding of a serious wound by taking this important step, and it’s necessary if your goal is paying off debt.

3.  Make a spending plan.  If you plan out in advance how much you will spend each month, and then make sure you don’t go over that, you will be much more successful in paying off debt.  Setting a budgeted amount of what you will spend on certain items like groceries, gasoline, dining out, entertainment, travel, gifts, etc. is the first step.  Second and even more important is the tracking of your monthly spending.  After doing this, you should know how much extra “debt-payment” money you have available each month to put towards paying off debt.

4.  Pay down your debts.  Now that you’ve created and are following a spending, you should be able to pay all your bills and hopefully have a little extra each month to go towards paying off debt.  Here’s how you can do it:

* Create a list of all the debt payments you make each month.

* After you’ve completed this list, note how big or small your debt problem is.

* Return to your monthly spending plan and the amount that you think you can save each month. (This is the extra money that you can use to pay down debt.)

* Look at your list of debts, and choose the one to pay off first. (We recommend starting with the smallest debt).

* Add the extra “debt-payment” amount to your regular payment for the debt that you’ve chosen to pay down first.

* As soon as you pay off this debt, apply the entire amount that you’ve been paying towards debt amount each month to the next smallest (now your smallest) debt amount.  Now you are sort of making a double payment each month on this debt.

* Keep it going!  Stay with this plan until all your debts are paid off!