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In recent years, money was cheap and other assets were expensive. But as each of the global economy’s credit creation engines breaks down and systemic leverage declines, money becomes scarce and expensive, triggering adjustments that are reversing the run-up in asset prices.
In this current financial crisis, the quantum of available capital, the munificent resources of central banks and sovereign wealth funds, and the globalization of capital flows may be some of the accepted "facts" that are revealed to be grand illusions. As Mark Twain once advised: "Don’t part with you illusions. When they are gone, you may still exist, but you have ceased to live."
Reserve Illusions
In recent years, there has been speculation about the amount of capital or liquidity available for investment globally. The substantial reserves of central banks and their acolytes, sovereign wealth funds, were frequently cited in support of the case for a large pool of "unleveraged" liquidity − that is, "real" money. In reality, the available pool of money may be more modest than assumed.
For example, China has close to $2 trillion in foreign exchange reserves. The reserves arise from dollars received from exports and foreign investment into China that are exchanged into Renminbi. The central bank generates Renminbi by printing money or borrowing through issuing bonds in the domestic market. On China’s "balance sheet," the reserves are essentially leveraged using domestic "liabilities."
In order to avoid increases in the value of the Renminbi that would affect the competitive position of its exporters, China undertakes "currency sterilization" − operations where it issues bonds to mop up the excess liquidity. China incurs costs – effectively a subsidy to its exporters − of around $60 billion per annum (the difference between the rate it pays on its Renminbi debt and the investment income on its reserves).
The dollars acquired are invested in foreign currency assets, around 60% in dollar-denominated U.S. Treasury bonds, government-sponsored enterprise (GSE) paper such as Freddie and Fannie Mae debt, and other high quality securities. China is exposed to price changes in these investments and currency risk because of the mismatch between foreign currency assets funded with local currency debt.
Deterioration in the U.S. economy and the need to issue additional debt to support the financial sector may place increasing pressure on the U.S. sovereign rating and the dollar. U.S. government support for financial institutions is already approaching 6% of Gross Domestic Product (GDP), compared to less than 4% for the savings and loan crisis.
Deterioration in the credit quality of the United States results in losses on investment through falls in the market value of the debt and a weaker dollar. The credit default swap (CDS) market for sovereign debt is increasingly pricing-in increased funding costs for the United States. The fee for hedging against losses on $10 million of Treasurys was about 0.58 per annum for 10 years (equivalent to $58,000 annually) in December 2008. This is an increase from 0.01% ($1,000) in 2007 and 0.40% ($40,000) in October 2008.
It is also not easy to tap this liquidity pool. Given the size of the portfolios, it is difficult for large investors such as China to rapidly mobilize a large portion of these funds by liquidating their investments and converting them into the home currency without substantial losses. This means that this money may not, in reality, be available, at least at short notice. If the dollar assets lose value or cannot be accessed, then China must still service its liabilities. It can print money but will suffer the economic consequences including inflation and higher funding costs.
The position of emerging-market sovereign investors with large portfolios of dollar assets is similar to that of a bank or leveraged hedge fund with poor quality assets. China’s Premier Wen Jiabao recently expressed concern: "If anything goes wrong in the U.S. financial sector, we are anxious about the safety and security of Chinese capital …." In December 2008, Wang Qishan, a Chinese vice premier, noted: "We hope the U.S. side will take the necessary measures to stabilize the economy and financial markets as well as guarantee the safety of China’s assets and investments in the U.S."
There are other factors affecting the availability of the reserves at central banks and sovereign wealth funds. In recent years, sovereign wealth funds have also suffered losses on some of their investments, most notably in U.S. and European financial institutions.
Some central banks have been forced to utilize reserves to support the domestic economy and banking system. For example, South Korea has used a portion of its reserves to provide dollars to banks unable to refinance short-term dollar borrowings in international money markets.
Russia has similarly used a significant portion of its reserves to support financial institutions and also its domestic markets. Russia’s reserves, which rank third after China’s and Japan’s reserves in size, have fallen $122.7 billion, or 21 percent, since August 2008. The reserves, including oil funds that exclusively act as a safety cushion for the budget, stood at $475.4 billion on November 2008.
Capital Illusions
The substantial buildup of foreign reserves in central banks of emerging markets and developing countries, as identified by David Roche (see David Roche and Bob McKee, 2007, "New Monetarism," Independent Strategy Publications), is really a liquidity creation scheme that relies on the dollar’s favored position in trade and as a reserve currency.
Many global currencies are pegged to the dollar at an artificially low rate, like the Chinese Renminbi, to maintain export competitiveness. This creates an outflow of dollars (via the trade deficit that is driven by excess U.S. demand for imports based on an overvalued dollar). Foreign central bankers are forced to purchase U.S. debt with dollars to mitigate upward pressure on their domestic currency.
Facilitating this process are the large, liquid markets in dollars and dollar investments capable of accommodating the very large investment requirements and the historically unimpeachable credit quality of the U.S. sovereign assets. The recycled dollars flow back to the United States to finance the spending.
This merry-go-round is a significant source of liquidity creation in financial markets. It also kept U.S. interest rates and cost of capital low, encouraging further borrowing to finance consumption and imports to keep the cycle going. This process increased the velocity of money and exaggerated the level of global liquidity.
The large buildup in reserves in oil exporters from higher oil prices and higher demand from strong world growth was also recycled into U.S. dollar debt. The entire process was reminiscent of the "petrodollar" recycling of the 1970s.
The central banks holding reserves were lending the funds used to purchase goods from the country. In effect, the exporter never got paid − at least until the loan to the buyer (the finance vendor) was paid off. As the debt crisis intensifies and global growth diminishes with increased defaults, it is increasingly likely that this debt will not be paid back in it entirety.
This liquidity circulation process supported, in part, the growth in global trade. This too may have been an illusion as the underlying process is a gigantic vendor financing scheme.
Trade Illusions
An accepted article of economic faith is that failure of economic cooperation and resurgent nationalism in the form of trade protectionism (for example, the Smoot-Hawley Tariff Act) contributed to the global financial crisis of the 1930s.
The stock market crash of 1929 and the subsequent banking crisis caused a collapse in financing and global demand, resulting in a sharp decrease in the U.S. trade surplus. Smoot-Hawley was passed in 1930 to deal with the problem of overcapacity in the U.S. economy through higher tariffs designed to increase domestic firms’ market share. The higher U.S. tariffs led to retaliation from trading partners affecting global trade.
The slowdown in central bank reserve recirculation affects global trade by decreasing the availability of financing for purchasers to buy goods and services. This is apparent in the sharp slowdown in consumer consumption in the United States, United Kingdom and other economies. It should be noted that it was the availability of cheap financing that fueled consumption by helping drive up asset prices which, in turn, allowed excessive borrowing against the inflated value of the assets.
Weakness in the global banking system (in particular, loan losses, the lack of capital and concerns about counter-party risk between large financial institutions) contributes to restricted availability of trade letters of credit, guarantees and trade finance generally. This exacerbates the problem. The restrictions, in turn, further impact the level of trade flows and capital recirculation, resulting in a further decrease in trade activity that in turn further slows down international credit creation.
It is not easy to fix the problem. Redirection of capital held in central banks and sovereign wealth funds to domestic economies affects the global capital flows needed to finance the debtor countries, such as the United States, and recapitalize the banking system. Maintenance of the cross border capital flows to finance the debtor countries budget and trade deficits slows down growth in emerging countries and also perpetuates the imbalances.
Trade has become subordinate to and the handmaiden of capital flows. As capital flows slow down, global trade follows. Indirectly, the contraction of cross border capital flows and credit acts as a barrier to trade. In each case, deleveraging is the end result.
This opens the way to "capital protectionism." Foreign investors may change their focus and reduce their willingness to finance the United States. Wen Jiabao, the Chinese prime minister, indicated that China’s "greatest contribution to the world" would be to keep its own economy running smoothly. This may signal a shift whereby China uses its savings to invest in the domestic economy rather than to finance U.S. needs.
China and other emerging countries with large reserves were motivated to build surpluses in response to the Asian crisis of 1997-98. Reserves were seen as protection against the destabilizing volatility of short-term capital flows. The strategy has proved to be flawed.
It promoted a global economy based on "vendor financing" by the exporting nations. The strategy also exposed the emerging countries to the currency and credit risk of the investments made with the reserves. Significant shifts in economic strategy are likely. Zhou Xiaochuan, governor of the Chinese central bank, commented: "Over-consumption and a high reliance on credit is the cause of the U.S. financial crisis. As the largest and most important economy in the world, the U.S. should take the initiative to adjust its policies, raise its savings ratio appropriately and reduce its trade and fiscal deficits."
More ominously, Chinese President Hu Jintao recently noted: "From a long-term perspective, it is necessary to change those models of economic growth that are not sustainable and to address the underlying problems in member economies."
There is also the risk of "traditional" trade protectionism. The end of the current liquidity cycle, like the one in the 1930s, may cause a sharp fall in exports. Exporting countries, seeking to maintain domestic growth, may try to boost exports by devaluation of the currency or subsidies. Import tariffs are less effective unless there is a large domestic market. Recently, the Chinese central bank did not rule out China depreciating its currency.
The change in these credit engines also distorts currency values and the patterns of global trade and capital flows. The current strength in the dollar, particularly against the euro, reflects repatriation of capital by investors and the shortage of dollars from the slowdown in the dollar liquidity recirculation process. It is also driven by the reliance on short-term dollar financing of some banks and countries and the need for refinancing. This is evident in the persistence of high interbank dollar rates and dollar strength.
The strength of the dollar is unhelpful in facilitating the required adjustment in the current account and also financing of the U.S. budget deficit.
The slowdown in the credit and liquidity processes outlined may have long-term effects on global trade flows. The volume of world traded, according to the World Bank, may contract by 2.1% in 2009. This contrasts with growth of 9.8 % 2006 and an estimated 6.2 % in 2008. The expected drop for 2009 is more severe than the last major contraction in trade volume of 1.9 % in 1975.
End of "Candy Floss" Money
Gillian Tett of the Financial Times coined the phrase "candy floss money" (see "Should Atlas still shrug?" January 15, 2007 Financial Times). New financial technology spun available "real" money into an exaggerated bubble that, like its fairground equivalent, collapses ultimately.
The global liquidity process was multifaceted. There was traditional domestic credit creation system built on the fractional reserve system that underpins banking. The leverage in the system was pushed to extreme levels. Losses and renewed regulation are forcing this system of credit creation to shut down.
The foreign exchange reserve system was another part of the global credit process. Dollar liquidity recirculation has also slowed as a result of reduced trade flows (driven by declines in U.S. consumption and imports), losses on dollar investments, domestic claims on reserves and the inability to readily mobilize large amount of reserves.
Another credit process − the export of yen savings via the yen carry trade and acquisition of foreign assets by Japanese investors − has also slowed.
The focus of the November 2008 G-20 meeting was firmly on financial sector reform. Stabilization of global capital flows in the short term and addressing global imbalances over the medium to long term barely merited a mention. It may well come to be seen in coming weeks and months as a major missed opportunity to address these issues.
Markets placed great faith in the volume of money available to support asset prices and assist in alleviating shortages of liquidity. The perceived abundance of liquidity was, in reality, merely an illusion created by high levels of debt and leverage as well as the structure of global capital flows. As the financial system deleverages, it is becoming clear, unsurprisingly, that available capital is more limited than previously estimated.
As Sigmund Freud once observed: "Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces."
There is an apocryphal story about a disgraced rock star who ended up in bankruptcy court. When asked what happened to his fortune of several million dollars, he responded: "Some went in drugs and alcohol, I gambled some of it away, some went on women and the rest I probably wasted!" Financial markets have "wasted" a staggering amount of money that ironically probably did not "exist" in the first place.
Satyajit Das is a risk consultant and author of "Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives" (2006, FT-Prentice Hall).
Before taking out a loan of any kind, it's very important to examine the repayment schedule and how that will impact upon you over the full term of the loan. You also need to look at this from the point of view of what might happen if you come under pressure in terms of your income. Nowhere is this more applicable than in the case of a line of credit where you use home equity to secure a lower interest rate.
If you've ever had any difficulty in the past which are credit rating than this type of loan where you secure the debt using the equity in your home can be a very attractive type of financial product. It's also very important to understand that if you default on the payments with this type of loan that you may finish up losing your home. That's why it's very important that you look at any of the problems that may arise before hand. If you have had difficulties which are credit rating in the past you need to ask yourself how you got into that situation and have things changed significantly since then.
That's why it's extremely important to be able to lay out the repayments and look at the different scenarios where you very the interest rate etc.
This calculator is extremely easy to use. It's also very easy to install. It will run on any existing version of Windows and is also been optimized to run on older computers to give the widest possible compatibility. All you have to do to use the calculator is input your loan amount, number of years and the interest rate. You will then be able to assess exactly what you're repayment schedule will be over the full term of your loan.
It's advisable to run several different sets of numbers as this will allow you to assess how a different interest-rate would affect the repayment schedule on an ongoing basis. Because this calculator runs very quickly it will allow you to go through several different sets of scenarios which will allow you to make the best decision possible.
If you are considering taking out an equity line of credit with your mortgage, you need to weigh your options before cashing out the equity in your home. When used wisely, a home equity line of credit can be an inexpensive way to borrow for home repairs, educational expenses, or debt consolidation. Here are several tips to help you decide if a home equity line of credit is right for you.
Home equity lines of credit are a revolving credit line similar to a credit card that is tied to the equity in your home. When you borrow against your line of credit your payments are based on what you spend. If you never spend using your line of credit, you will never have payments unless your lender charges you an annual fee.
The advantage of an equity line of credit over a credit card is that you will receive a lower interest rate on the line of credit because it is secured by your home. Unsecured lines of credit such as credit cards have significantly higher interest rates and fees. Your home equity line will come with a debit card and checks for easy access to your money. The disadvantage of this type of home equity loan is the ease of access to your equity might tempt you to make purchases that you might not otherwise make. One final advantage over credit cards is the interest you pay can be deducted from your federal income tax.
If you are in the process of applying for a new mortgage or refinancing your existing mortgage, you can add a home equity line of credit as an option from your lender. To learn more about your mortgage and home equity options, including common mistakes to avoid, register for a free mortgage guidebook.
Many small business owners are not concerned about their business credit or know what Business Credit is until they need to get a business line of credit or money for their business. Businesses of all sizes need to have a credit line with at least one lender as soon as they can acquire it. Lines of credit help build your business’s credit profile, and can pay for needed materials and equipment, that can help grow your business.
Before you can develop a line of credit for your existing business, your business will need to be set up as a business. Legally. This means you need to have a business phone and address that matches your state and/or county records. Consistency is key when setting up your business entity correctly in the eyes of the financial institutions. Banks will and do check these along with 17 other items to see if your business is a real business.
A business line of credit is usually a set amount of money that you can borrow up to. You can use this line of credit all at once, or over a period of time. In this way, lines of credit differ from loans. They behave more like credit cards, but you do not have the plastic and high interest rates. Your limit on a business line of credit stays the same, but the amount that you have withdrawn from that line of credit varies, and your payment will probably vary, too.
source: FPR
Have a line of credit for your business available before your business needs it. A line of credit can save your business during the slow season or help you survive those first few critical years when your business is either feast or famine. Remember these Business lines of credit don’t appear on your personal credit report!
Get the basics you need for obtaining business credit, then start looking for financial institutions that offer a lines of business credit. Once you obtain your business line of credit, you can consider business opportunities that were simply not possible before.
When you take a loan using your home as collateral, you are taking an equity line credit. It has the advantage of being able to work for you even though your home is already under one mortgage. In addition, it helps to consolidate all those other little loans that just won’t stop bugging you. That’s why you see a lot of folks heading that way.
An equity line credit is usually taken secondary to a first mortgage. You must know how those situations just pop up regardless of what you have planned, and then they seem to throw a monkey wrench in your financial breakthrough program. However, you are welcome nonetheless even as a first timer. There is room enough for everyone as long as you are smart enough to work everything out again from the basics.
I have heard of people taking equity line credit loans to pay debts. While that is noble and all, I think they should think more in terms of building for the future. You see, if you create another debt so pay off one, you have only worsened your condition because of the extra interest you have incurred. That is why any kind of borrowing, even the equity line of credit type, should be used on investments that will pay their own way. That way, you can better beat the debt cycle. I’m certain you catch my drift.
You know, you can actually make payments to various peoples that you owe money to by using your equity line of credit checkbook. It is not something that a lot of people are aware of, and as such they don’t take advantage of it. Fancy having to go cash the dough yourself when you could just have given them a check.
Your kid’s college tuition is almost best paid for by equity line credit. I’m just supposing he didn’t get a scholarship, or did he? Because if he did, you don’t have to worry. But if he did not get that scholarship, and you don’t want him to waste all those other years before eventually making it into college, you may want to think more seriously about the equity line of credit.
Loan Modification Agreement is arguably the most effective tool you can use if you are behind on your mortgage. Don’t lose your home due to foreclosure when you can take out a Loan Modification that will help you keep your home and reduce your monthly expenses. A Loan Modification can prevent foreclosure only if you act now before its too late. Click here http://www.loan-int.com/loan-modification/ for more information..Your equity
Last May, Steve Ahern got ready to renovate his home. "I refinanced my mortgage and kept my original home-equity line of credit," says Ahern, president of Wealth Management Advisors in Tewksbury, Mass. "A few weeks later, Bank of America reduced the amount available on my home-equity line by $25,100."
Ahern is by no means alone. This year, hundreds of thousands of home-equity lines of credit (HELOCs) have been trimmed, or frozen altogether, by lenders. Affected homeowners can borrow less or may not be able to use their HELOCs at all. This can be especially painful if you were about to draw that money to remodel your kitchen, say, or pay a tuition bill.
Limited access
The pullback is a response to falling home values. As the name indicates, a HELOC is a credit line secured by the equity in your home—the current value of the home minus the total outstanding loans on it. HELOC lenders come behind first-mortgage lenders when it's time for repayment, so they fear they'll lose money if a home is sold at a low price. The terms of these agreements allow lenders to cut back or cut off the lines, and that's what many have done. Even if you have an excellent credit score and have never missed a payment, you may still be affected.
Bank of America declined to discuss its reasons for trimming Ahern's credit line, but a spokesman did say that the bank was limiting customer access to HELOC accounts "in areas of the country with significant home-value declines." When lenders review their outstanding HELOCs, they typically value residential properties by region rather than attempting individual home appraisals. For example, a bank might estimate that homes in your area have fallen by 20 percent since 2005 and conclude that you don't have enough home equity to cover your HELOC.
If your line of credit has been affected, you might not need to do anything if you have cash reserves and no immediate plans for a major expense that would require drawing on it. In an emergency, you are better off withdrawing from a money-market fund, now paying around 2 percent, than tapping a HELOC and paying about 5 percent on the debt.
Appealing a freeze
But if you'd like to restore your credit line, call your lender and ask how to do it. Typically, you'll need an appraisal to show that your property has held its value. Contact an appraiser who is approved by the lender and familiar with your neighborhood. You'll probably pay a few hundred dollars for the appraisal. If it shows that your home is worth, say, $300,000, and you have a $200,000 balance on your first mortgage, you might qualify for a $40,000 HELOC, bringing the total to $240,000. "Lenders may be comfortable with an 80 percent loan-to-value ratio," says Greg McBride, a senior financial analyst at Bankrate.com.
This approach doesn't always work, as Ahern learned. "I wrote to Bank of America and provided copies of the recent appraisal," he says. "The bank wrote back saying my line-of-credit reduction had been based upon ‘other factors,' and would not restore the promised credit line."
You can also try to refinance with another lender. "Getting a new HELOC may require you to show a good credit history and proof of income," McBride says. "You might pay some fees." You can use the new HELOC to pay off any debt on the old one.
If you have a credit line and expect to draw on it, you should probably act quickly. You can park the money in a bank until you need it. You'll pay about 5 percent interest and earn about 2 percent on your funds, so your carrying cost will be about 3 percent. And since HELOC interest is generally tax-deductible, it would be around 2 percent after taxes, assuming an effective tax rate of about 33 percent.
Here today, gone tomorrow
"I advised one client to pull money from his line of credit," says Scott Dauenhauer, president of Meridian Wealth Management in Laguna Hills, Calif. "He knew that he was going to use those funds within a few months for his daughter's wedding. He followed my advice and, about a month later, his home-equity line was frozen."
Similarly, Ann Terranova, a certified financial planner and founder of Union Financial Partners in San Francisco, tells of a client who was using a $200,000 HELOC to start a restaurant. "He was drawing on the money as needed to pay the contractors," she says. "The project was fully under way, perhaps $80,000 of the credit line had been utilized." Then he got a notice saying the bank was freezing his credit line.
The client's mortgage broker told him to immediately write a check for almost the full balance, deposit it in his bank account, and hope it would clear. It did, Terranova says. "But if he had not done that, he would not have had access to funds he required to start the business."
This article was also published in Consumer Reports Money Adviser.
The choice between a home equity loan or a line of credit is seldom black or white. But here are a couple of generalizations:
A home equity loan might be the best fit if you plan to use the money in a lump sum for a one-time occasion such as consolidating your credit card debt, replacing the roof, or paying for your daughter's wedding. The interest rate is fixed, and so are the monthly payments, and you can budget accordingly.
A HELOC -- home equity line of credit -- might be a better fit if you will need money periodically and not all at once. This is the case in lengthy home remodeling projects when you pay the contractor in two or more draws. Or perhaps you will need to shed an arm and a leg at the beginning of each semester over the next four years when the kids head off to college. A HELOC gives you the flexibility to borrow what you need, when you need it.
Q & A
* Do I need the money in a lump sum, or in several installments?
If you need it in a lump sum, lean toward getting a home equity loan. If you need the money in installments, lean toward getting an equity line of credit.
* Is it for a long-term purpose, or a short-term purpose? If the money is to be spent on something that will last a long time, like a roof or a car, an equity loan might be better. If the money is to be spent on something that won't last long, like a semester in college or a wedding and reception, think about getting an equity line of credit.
* How big a monthly payment can I handle? A home equity loan requires you to pay principal and interest every month for the life of the loan. A home equity line of credit allows you to pay just the interest for several years, if that's what you want to do. It's a whole other question whether it's a good idea to pay only the interest, and not the principal, for a long time.
* Would a line of credit tempt me to use the money carelessly? Naturally, if you answer this in the affirmative, you should consider getting a home equity loan, because you pay off the principal and interest over time, and it's not a revolving credit account.
* Does a variable rate bother me? A home equity line of credit has an adjustable rate that most likely changes every time the Federal Reserve raises or lowers the federal funds rate. If you don't like the idea of having a rate that could rise every time the Fed meets, consider getting a home equity loan, which has a fixed rate.
Introduction Unless you have been living on Mars for the last year or so, you would know that the days of cheap plentiful oil are well and truly over. At this time of writing, each barrel of oil is being sold at nearly US$150, a price no one would have possibly predicted almost five years ago when prices exhibited an upward trend.
Believe it or not, high oil prices are definitely here to stay. This necessarily translates into higher inflation rates and much reduced purchasing power. It means that more and more money will be needed to buy the same number of units of goods.
As it stands, weak prevailing US economic sentiments do not help at all in lifting our spirits. Already, high food and fuel prices are triggering violent public protests in many developing countries.
This is Where Opportunities Lie...“In the middle of difficulty lies opportunity", says Albert Einstein. Do not for a moment put your hands up, despair and give up. I am telling you it only takes a change in your attitude and minor tweaks in your lifestyle to maintain a more than reasonable living standard.
Not only that, you will get to save money as you go along and pass down good-as-gold thrifty habits to our younger generations.
Without further ado, let’s examine how 7 simple and practical tips can help you beat inflation and save as much money as you want. They can be easily implemented by anyone living in any country but nonetheless requires a little discipline on your part.
Secret Tip #1If you really need a credit card, then cancel all other credit cards you are holding and just hang on to one. Yes, you heard me right. Keep only one credit card. If not, eschew credit cards totally and go for a debit card instead.
In this way, you will intuitively curb your spending and at the same time, consolidate all purchase points on a single card. Once you have accumulated sufficient points, go ahead and redeem a free restaurant voucher or airline ticket for yourself. Yeah, the best things are free!
Secret Tip #2Keep your hair reasonably short but presentable. If you are still reading this article, you can’t be living on Mars. And you should be aware it is summertime right now. That is when the mercury shoots right off the edge and your utility bills chew up whatever spare cash you have.
Hear me out. Your head radiates a considerably amount of heat. By keeping your hair short, you will feel cool no matter what time of the day is and avoid reaching out for that air-con remote. As you know, air-conditioners are notorious for guzzling energy and can easily account for two-thirds of your energy bills.
Secret Tip #3Consolidate and perform all “manual" tasks in one shot. Take for example you are a stay-at-home mom and have to carry out household chores throughout the day. These chores may include taking the kids out to school, mopping the floor, hanging the laundry and so on. Instead make it a point to carry out as many tasks consecutively as possible. Once you are done, treat yourself to a quick but relaxing ten-minute shower, splash on some fresh-smelling talcum powder and again, you can avoid using the air-conditioner.
You smell good, the work is done and by the way, did I mention that doing household chores is a proven great way to slim down? I guarantee you will be pleasantly surprised at just how much you can save by just avoiding switching on the air-conditioner.
Secret Tip #4Did you know you can literally have your cake and eat it too? How so? A really neat trick I use is to check out nearby hotels and pastry shops for their “special offers".
This is not commonly advertised but it is known that many of them offer massive discounts in the evenings on bread or cakes that are unsold. They are edible for sure and you can keep some for a hearty breakfast tomorrow morning. Most importantly, you get to save some money on quality food!
Secret Tip #5Many of us own a car for either work or personal reasons. But no matter what the vehicle is bought for, all of us are price-takers and hence face the problem of rocketing fuel prices. If you find yourself unwilling or unable to give up your wheeler and take public transport instead, here’s what you should do to save gas and stretch your dollar: simply junk the junk.
Studies have shown on average every 50kg added load in your car increases fuel consumption by 2 percent. In addition, making sure your car is properly maintained improves your gas mileage and save fuel. This means to keep your tires properly inflated (inflation!) and use thinner tires if you can.
Secret Tip #6This is a real clever way to slash a huge portion of your weekly grocery bills. Food is essential to sustain life but the next time you venture down to the nearby supermarket, keep your eyes peeled for “house brands". They are actually food products bought and packaged by the supermarkets themselves. In the process the unwelcome middle-man is cut off from the supply chain and any savings generated will translate to lower food prices for everyday consumers like us.
Conclusive studies have shown the food quality and nutritional value remains unaltered at all, even when compared to more expensive brands. Just try out secret tactic and you will be amazed how all these savings will add up every month.
Secret Tip #7The rise of budget airlines is unprecedented and should not have gone unnoticed by anyone. Whether you are an avid traveler or a businessman, keep a good lookout for special promotional prices offered by these airlines. In fact, an airline ticket can easily go below a dollar, excluding various taxes and surcharges!
Some of them may have hit the wrong headline for lower safety standards or financial difficulties but all of them are air-worthy I am sure. Also, they represent good value-for-money air travel deals. For example, you get to save on cheaper flight tickets, lower (pesky) fuel and tax surcharges and you don’t compromise on comfort greatly because most budget-type flights are short, each lasting only a few hours.
ConclusionThe tips I have written down here is certainly not exhaustive! So please provide your valuable comments and everyone will benefit as a result.
Inflation is here to stay for the rest of this year at least. Prudence is now the name of the game. As suggested, make a truthful commitment to change your attitude and lifestyle habits. In the process, you will find yourself saving lots of money and boosting your purchasing power. Beat inflation at its own game!
Many people believe that going green means spending more money. It's true that when "green" lifestyle options are discussed, the first things mentioned are solar panels and hybrid cars. These are investments that most people simply can't afford. Here are some tips you can easily implement that will help the environment and save you money.
1. Stop the junk mail. Every year millions of trees are chopped down to create the junk mail that is sent to your home. You can contact the Direct Marketing Association to have your name removed from their mailing list. You will have less mail to go through on a daily basis, and lower trash bills.
2. Receive and pay your bills electronically. Set up online billing with your utilities and credit companies to receive your bills electronically every month (and pay them that way too.) You will be saving trees and the cost of postage.
3. Shut down your electronics when not in use. The average computer kept on 24 hours a day uses 1,000 kilowatt hours of electricity. Even when your TV's off, it's still using power. Unplug all your electronics when not in use. Any change you make will lessen your electric bill.
4. Use less so that you have less going into the trash. Eat ice cream in a cone rather than a cup (trash) or bowl (has to be washed). Bring your travel mug to the place where you buy your coffee versus throwing out a cup every time. Less trash will be better for the environment and will lessen your household trash, therefore reducing your trash bill.
5. Cutting your utility bills. Take shorter showers - reducing your shower time by two minutes will save 10 gallons of water. Removing the lint from your dryer after each use will save electricity. Switch your light bulbs to Compact Fluorescent Bulbs and you save four times the energy of a regular light bulb.
6. Collect water. Place covered containers outside to collect rain water that you can use to water your lawn, flower beds and gardens. We keep a bucket in the shower to collect water as we get the water to the right temperature and use that to water our indoor plants. This will reduce your water bill.
7. Reuse and Reduce. The foil or plastic bag you use only once can be reused. Purchase reusable canvas bags to take to the store (some stores give discounts to customers who bring their own bags.) The more ways you can think of to "reuse and reduce," the less you will be buying from the grocery store.
8. Recycle. Check with your city or town so you can recycle as much as you can. My town picks up glass, plastic, metal and newspapers weekly. Monthly they pick up mixed paper - magazine, junk mail, envelopes, wrapping paper etc. We can also drop off cardboard - both corrugated and food boxes. Check with your town about what you can recycle. Less trash means lower trash bills from your hauler.
Current statistics show that banks are showing a considerable decline on each bank account holder’s savings and have shown an increased in the number of withdrawals per month leaving people little money to spend before the next salary strikes their account.
Along this fact shows a relative increase in the amount of spending made in private institutions marketing different products.
While these facts and a host of temptations are a commonplace scenario in the real world, there are many ways by which you can keep yourself from getting into the hype and aid you in creating and developing your personal and unique habit of saving a few dollars from your basic salary.
Compulsive Buying – Given enough money, 7 out of 10 people lure into the idea of buying a personal item they like in a store at a first glance.
In a simulated sociological study, people who originally planned on window-shopping ended up buying personal stuff if they are taking their personal bankcards with them.
If you are doing window-shopping, limit your spending to a few bucks and try making your list the next time you plan on buying such items. Buy only the store items you need and abandon those that do not satisfy an immediate need.
Budgeting – Along with your pursuit to saving money, it is also important to keep an organized and effective, yet reasonable budgeting technique. Budgeting eliminates buying temptations that would tend to build up during malling and help you save money along the process due to preformed lists of items you need to buy.
Performing Price Comparison – The World Wide Web provides a great avenue on providing a checklist of prices on specific items that you plan on buying.
This is great for you if you are into bulk buying and plan on conducting your malling activity in one place. This will give you a good idea if the usual store from where you usually get all your everyday household needs provides you a reasonable price for specific products.
Take All the Convenience At Home – Lunch, snacks, and major meals are something which you can prepare at home. If you are serious on saving money, you can prepare all this from home and get away with some amenities of the gut by replacing soda with water. This is not only beneficial to your pocket but does a great deal for your health as well.
Many people are looking for a way to make a lot of money very quickly, and without much effort. Many times people get scammed out of their hard earned money by someone else that is trying to achieve the same goals that they are trying to achieve.
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High income business opportunities often come few and far between, and if you are lucky to be offered one of these opportunities chances are you are not going to be in a financial situation to take this chance. Although high income business opportunities are not very plentiful, there are many different opportunities online that will help you to create a higher income for yourself.
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There are some legitimate high income business opportunities still available today, in the areas of real estate, website development and information publishing, affiliate marketing, and other online avenues such as creating membership websites.
The key is to learn how to find untapped niche markets, and how to create residual income and multiple income streams. You will need some training in this area unless you are entrepreneurially minded, and being the skeptic that I am, I look upon many of these trainers with great suspicion.
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I do have some personal experience with Robert Allen who provides excellent and valuable training, and has helped bring high income business opportunities into the reach of even those of us who were not raised with this kind of entrepreneurial mindset. I have participated in his teleconference trainings which I found helpful.
In order to find high income home business opportunities you need to know where to find them and where to look. Research is key, and understanding new trends. Once you have some education in this area, you will find new opportunities opening up that you might have missed before.
Finding High Income Home Business Opportunities learn more highincome
For a good beginning on understanding how to earn legitimate income on the internet, and how to discover little known and highly profitable niches, take the free Internet Business Ideas eCourse.
More than how much money comes in it's a matter of how you spend it. That's where budgeting comes in. A detailed budget helps you keep tabs on your income. There are many people who are able to live comfortably on what they earn, even if their income is modest. True personal finance management boils down to spending less than you earn. A budget, therefore, keeps track of income and expenses. It will segregate your fixed expenses like your food, stay and insurance and your variable expenses like your travel, entertainment etc.
You can then figure out how much you can save and know what is available to invest. Experts advise you to keep at least half a year's income invested so that you can access it easily in the event of an emergency. Setting realistic goals is a big part of budgeting, along with understanding the difference between wants and needs.
The concept of personal finance and its management began when money could be exchanged for goods, when it became a matter of more than food, clothing and shelter. After money came into the picture, to make a living, people got jobs and were compensated in cash. The origin of personal finance and its management began with the concept of want versus resources. Living comfortably involved having enough money to buy all the things one wanted. Next came the necessity to balance a checkbook, to avoid getting into debt. These days, with credit freely available along with various financial alternatives that give you the means to achieve your financial goals, it has literally become mandatory to become skilled in making the right choices.
Managing personal finance usually begins with handling pocket money at a young age. Thereafter comes the ability to plan and budget. Budgeting and planning your expenses, investing for future requirements and retirement planning broadly covers the different aspects of personal finance.
Adequate insurance for you and your family is an essential part of investing. Life, health and property insurance protects you and your loved ones from unforeseen mishaps. Most people also make sure they have authorized someone through a power of attorney so that they can manage their personal finance in case they are unable to do it. It is also wise to make a will so that your assets can be handled smoothly.
Good personal finance management involves investing, managing risk, insurance, understanding and tackling debt and credit, knowing the value of time and money and ensuring that your retirement is taken care of. While planning you make an assessment of your present situation in relation to your goals. Managing personal finances becomes a hassle when you get into debt. Debt is what you owe, and can be good and bad. If you have borrowed money to buy property, it is an investment and the money you pay against interest on the loan is tax deductible. But running up debts like overdue credit cards is not good. This is why budgeting is very important so that you know exactly where your money is going. It is very easy to lose track of what you spend without a budget.
Dental insurance is an important part of maintaining good oral health, as dental expenses cost more than ever. You can easily pay hundreds of dollars on even a routine trip to the dentist, and basic and major procedures can cost thousands. If you have children, that cost multiplies. Dental insurance makes trips to the dentist more affordable, which also makes you and your family more likely to seek dental care as recommended. Here are some tips to help you find a cost-effective dental insurance plan:
1. Get a recommendation from your current dentist. If you have a favorite dentist you would like to keep seeing, check with that dentist about which plans he/she belongs to. Dentists are also good resources to learn which plans to avoid. Word travels fast in the dental care community, so your dentist should be able to provide good counsel about which plans are good and which ones are bad. If you don’t have a current dentist, get a recommendation from a friend. Most dentists or their staff will be more than happy to answer your questions to secure a new patient.
2. Search for dental insurance quotes online. The Internet has numerous websites dedicated to providing you with multiple online quotes for dental insurance. Don’t just look at price when comparing quotes; you also have to compare the features and reputation of the insurer. Check an insurer’s reputation with the Better Business Bureau. There are a lot of fraudulent insurance companies dealing in dental insurance. Any company you choose should be licensed with your state. You can check for licenses and complaints with your state insurance department.
3. Evaluate the network of dentists before buying. Not all dental insurance plans have extensive networks of dental care providers. Before you sign up for a plan, make sure there are qualified dentists in your area. You should have several to choose from in case you decide that you don’t like a particular dentist. Most plans will allow you to browse their provider directory prior to purchasing the insurance. If an insurer will not allow you to do that, take that is a red flag and find another insurer.
4. Take note of how treatment is determined. You don’t want to buy dental insurance from an insurer that controls treatment decisions. Some plans will require dentists to treat you in the least expensive way possible even if there is a better treatment available. You want to get a plan that allows you and your dentist to determine how your dental issues will be treated. You will likely have to pay a higher co-payment for procedures that are more expensive, but you should have the choice to do so if you so desire.
5. Inquire about dentist scheduling. Some dental insurance plans cause patients to only be seen at certain off-peak appointment times. These are the only times that people with these plans can get appointments, and they are typically the slowest times during the day and week. Dentists often use this practice to help fill gaps in their schedules and leave room for cash patients at the best appointment times. It’s incredibly inconvenient for you, however, to be restricted to only the unpopular appointment times. Before signing up for a plan, call one or more of the dentists in the network to ask about their scheduling policy.
6. Consider what type of treatments you need covered and at what level. Dental insurance classifies dental procedures as preventative, basic, and major. Most dental insurance will cover at least preventative and basic procedures, but the amount of coverage will vary from carrier to carrier and plan to plan. Before buying a dental insurance plan, consider how much care you have required in the past as a way of predicting how much you will need in the future. Only get what you need. For example, if you are young, you probably don’t need denture coverage.
7. Focus on preventative coverage if you are young and have healthy teeth and gums. You can easily find a dental insurance plan to cover 100% of preventative dental care including bi-yearly checkups, cleanings, and X-rays. By focusing on obtaining coverage for these routine procedures, you can help prevent the need for more extensive procedures like root canals in the future. Typically, non-preventative dental procedures are not fully covered by dental insurance and you will have to pay 20%-50% co-pay. With good preventative care you may not need coverage for those procedures at all, and you can always get a supplemental policy to cover emergencies.
8. Pay attention to the maximum amount of coverage allowed by the dental insurance plan. A comprehensive plan should have at least a $1,000 maximum coverage, but more is always better. A major dental procedure can cost hundreds if not thousands of dollars, and you can easily max out your insurance in one trip. When comparing different dental insurance plans, compare the coverage limits. Higher limits usually require higher premiums, but they may be worth it if you require multiple dental procedures.
9. Crunch the numbers to determine if a plan is cost effective. Calculate your yearly premium and make sure it does not exceed the maximum coverage. If you are paying $1,000 a year in premiums, it doesn’t make sense to get a policy with a $1,000 maximum coverage. Consider how much you typically spend each year in dental fees. Make sure your premiums do not exceed that amount either. Don’t forget to factor in how much you will need to pay in co-payments.
10. Try to get group dental insurance if possible. Group insurance is almost always cheaper than an individual policy because the premium is either subsidized by an employer or discounted because of bulk membership. If your employer doesn’t offer dental benefits or you are self-employed, you may still qualify for a group plan elsewhere. Some trade associations and fraternal associations offer members the opportunity to buy group health and dental insurance. While there are many affordable individual plans that you can purchase, if you have access to group insurance you should take it.
Buying and maintaining affordable health insurance can seem like a daunting proposition. With so many options to choose from and countless figures associated with each policy, it can sometimes seem as though you need an M.D. simply to make sense of it all. Thankfully there are some basic tips you can use for guidance along the way.
1. Know your health. Buying health insurance is confusing enough without having to wonder what those physicals will find. If you haven't been to a clinic for a checkup in the last several years, you may want to get a detailed overview before you begin shopping. Often just by getting your blood chemistry and a few other key indicators, you can save yourself considerable time down the road.
2. If you have a pre-existing medical condition such as diabetes or hypertension, you may have trouble getting affordable health insurance. Do not give up, however – these days a number of boutique insurance companies specialize in insuring people with certain disorders. Even if you believe you will never be able to find annual fees that suit your budget, a little research is bound to discover at least one or two companies who offer a higher standard of care and support. Needless to say, you want to avoid the major insurance companies for the same reason.
3. Ask your existing doctors and specialists whether they belong to any group plans such as HMOs or PPOs. You may not have anyone in your Rolodex if you have avoided medical care during a period of unemployment, but it is always wise to look ahead and anticipate the people you expect to visit. This includes psychiatrists, chiropractors and countless other subspecialties, so make a list of your ideal caregivers. Even if you cannot think of anyone offhand, most experts recommend calling a local treatment center and seeing what kind of insurance they offer the best rates with.
4. Look for group plans, even if you're between jobs. Too many people assume that if they have lost their jobs, few options exist for affordable health care. Not so – today a growing stable of trade groups, guilds and unions have sprung up to help people who may be out of work or self-employed. It's not unusual for major insurance companies to offer outstanding rates to group plans such as these, so you may save thousands each year just by joining up. The last thing you want is to pay out of pocket just because you freelance, so look for like-minded people in your area to see what's possible.
5. Another good option if you have recently terminated at another job is to take advantage of the Consolidated Omnibus Budget Reconciliation Act, or COBRA. This legislation stipulates that employers must provide you with supplemental health insurance for up to a year after you leave the job – not a long term plan, perhaps, but a welcome buffer if you do not relish the thought of spending weeks without a safety net. Most employers will extend COBRA benefits automatically, though some may require proof of employment and recent health records. Be prepared to produce all this information if you want to avoid lag times.
6. Decide whether you want to go with a Preferred Provider Organization (PPO) or a Health Maintenance Organization (HMO). Each offers different pros and cons, but the difference boils down to a simple question of access versus cost. PPOs are popular because they allow you to seek care outside your original health network, albeit it at an increased deductible and copay. HMOs, on the other hand, only cover caregivers within the network – but they may offer significant savings if you don't foresee the need to travel outside your plan for treatment.
7. Shop around! Health insurance companies are notorious for the widely divergent algorithms they use to determine your premiums. If you are unhappy with the prices at one, be sure to collect several more estimates before you commit to any plan. It's not unusual for two companies with the same data and case history to vary as much as 50 percent from one another, so you owe it to yourself to get a boarder overview. Don't just limit yourself to major providers either – a number of low-volume insurance companies offer special deals that may benefit people in your neighborhood or profession.
8. Be sure and check the copays on any medications you are already taking. Too many people forget this step, only to find themselves astonished by their first trip to the pharmacy. You may also want to look into the difference in cost for brand-name versus generic drugs – sometimes you can find a steep discount by switching to a medication only one provider covers. When in doubt, ask a customer service professional about your precise medication and dosage, as you want to get a specific number nailed down before you sign.
9. Save by combining health care policies with family members. It is a well-known fact that married couples enjoy less expensive health care premiums than their unmarried counterparts, but you may be able to save further by putting the whole family under a single umbrella plan. Spouses and children help distribute the risk for insurance carriers, giving them greater incentive to match or beat the other estimates you have seen. You may also be able to combine health insurance with life insurance to create an overarching combined policy – again, the premiums here will inevitably drop as you fold more coverages in.
10. Take care of yourself. This is perhaps self-evident, but it remains of paramount importance to individuals who see themselves switching carriers sometime in the future. Try quitting smoking, losing weight, increasing your exercise and otherwise taking daily steps to improve your health. It is a simple fact of the insurance business that private companies work for profit – if you can minimize the risk they take in covering you, you can expect to pay far less money over the course of your lifetime.
There was a time when health insurance was a luxury for average people, but that time has long since passed. These days health insurance is a must. Costs for medical care are higher than ever. Without health insurance, an accident or illness could seriously compromise your financial future. Moreover, having access to quality health insurance can help keep you healthier overall.
Sorting through health insurance quotes is no easy task. There are literally thousands of different plans out there for you to choose from. By far the easiest way to get good health insurance is through your employer or your spouse’s employer if you are so lucky. Group insurance plans are practically always the most cost-effective option; so if you have one available to you, take it. If you are self-employed, unemployed, or work for a company that doesn’t offer health insurance benefits, you’ll have to buy an individual plan.
In general, there are two main types of health insurance plans: indemnity plans and managed care plans. Indemnity plans are the more expensive of the two because you have a lot of freedom to choose your health care providers. These health insurance plans typically feature high co-pays and high deductibles. Preventative care, mental health care, prescription drug coverage, vision care, and dental care are usually excluded from indemnity plans unless added on.
Managed care is the most common type of health insurance these days. There are many different levels of managed care, and some plans incorporate features of indemnity coverage to add flexibility. Managed care plans include health maintenance organizations (HMOs), point of service plans (POS), and preferred provider organizations (PPOs). Typical characteristics of managed care health insurance include low co-pays, low deductibles, and a network of preferred or mandatory health care providers. Preventative care, prescription coverage, mental health care, vision care, and dental care are often included in the coverage. Some managed care plans, however, require pre-authorization of services.
Choosing the right health care plan for you and your family can be a complicated process. It’s not enough to choose the plan with the cheapest premium, because you could end up paying a lot more out-of-pocket expenses if the services you need are not covered. The best way to shop for health insurance is to get a variety of health insurance quotes from different insurers. Try to compare apples to apples by creating a list of benefits you and your family must have and looking for plans that satisfy those requirements.
When evaluating different health insurance quotes, there are three areas you should consider: benefits covered, applicable restrictions, and total costs. Most health insurance quotes include doctor’s visits, hospital visits, and surgical fees as standard benefits. Preventative care, vision care, etc. are considered optional benefits that may or may not be included. Pay attention to the maximum pay out of the policy as well. Determine if you can live with the restrictions of the policy. If you have a current doctor you would like to keep seeing who is excluded from a managed care network, that managed care plan may not be the one for you. Finally, consider cost. The total cost of an insurance quote is not just your premium, but how much money out-of-pocket you’ll have to pay in co-pays, deductibles, and uncovered services. This can be hard to evaluate, but it’s the most crucial factor to consider when evaluating health insurance quotes.
Getting insurance after you retire can be challenging if you retire before the age of 65. At 65, you become eligible for Medicare health coverage. However, before 65, your options may be limited. Because health insurance is so important, particularly as you advance in age, you should be sure to have a plan for coverage before you retire early. Make sure you will have access to coverage at least until you reach Medicare eligibility.
The best option for extending health care benefits past retirement is to join your spouse’s employer sponsored health plan. This is almost always the most affordable option. Before you rely on your spouse’s health insurance to carry you until you’re 65, however, consider if you spouse will be in that job until then and whether the business is stable and reliable. If your spouse suddenly loses that job, both of you will be without health insurance.
Some employers extend health benefits to their retired employees. This is often a good option for continuing your health care. Be aware, however, that these plans are not usually the same plan you have become accustomed to as a working employee. Usually these plans offer reduced coverage and require increased premiums. Sometimes you will have to pay the entire premium without any employer subsidizing. It’s important to find out exactly what is covered under your employer’s retirement health benefits and what is not. If you are on expensive medication, for example, make sure prescriptions are covered. Find out if there is a lifetime cap on coverage as well. A major illness or heart attack can quickly drain your coverage leaving you without insurance. Finally, find out if the coverage has a time limit. Some of these plans are only available for a year or two after retirement. You want to make sure you’re covered until the age of 65.
If you worked in a business with 20 or more employees before you retired, you may be eligible to purchase COBRA (Consolidated Omnibus Budget Reconciliation Act) insurance. You are only eligible if your employer offered group insurance to employees, however. These plans are more expensive than regular group insurance, but they are less than individual plans. The only catch is, they are only available for 18 months after retirement.
If you don’t have access to group health insurance, you may have to purchase an individual plan. These plans are going to cost a fortune in premiums, however, because of your advanced age. Most insurers will consider you a high risk particularly if you have a history of health problems. In order to get coverage, you may have to waive treatment of pre-existing conditions and pay for treatment of those conditions out-of-pocket. This is probably the most expensive option and should be your last resort for health insurance.
Finally, if none of these options work for you because of lack of funds or ineligibility, you can look to your state assistance programs for help. Medicaid is available for low-income seniors that meet eligibility requirements. Coverage and cost varies from state to state, so you have to research what is available where you live. No matter what, you cannot go without health insurance. A catastrophic illness or accident could ruin you physically and financially, and unfortunately the older you get, the more likely you are to get sick.
Sending children off to college is a bittersweet moment. On the one hand, you’re proud to have raised them into adulthood, but on the other hand, you are afraid to let them go. Making sure your college student has the right medical coverage is one way to bolster your piece of mind. You never know what type of medical treatment your child will need while he or she is away, so try to get the most coverage you can afford.
If your child has been covered under your health insurance whether it’s group insurance or individual insurance, odds are that the coverage will remain available until the child is 24 years old. This usually applies even if the child doesn’t live in the home. Of course, you’ll have to keep paying for it, and you may have to pay an increased premium. Keeping your college bound child on your plan, however, isn’t always the best choice. Most colleges offer health plans through the school that have been subsidized by tuition to make them quite affordable.
College health plans vary greatly from school to school. Generally, these plans provide most of the coverage a college student needs. Preventative care including regular pelvic exams and PAP tests is usually included, but it may not be as extensive as a traditional policy. Most of the care your child will receive is from the student health center. These centers are set up to treat most minor ailments and injuries and may have specialists visit on a weekly basis. Students are not usually charged anything to visit the student health center when they have the college health plan. Some plans, however, may charge for lab work, X-rays, and other diagnostic testing. Prescriptions usually require a fee, but much of that fee is often covered by the plan.
Depending on what type of health plan your family has, it may be a good idea to purchase the college health plan even when your child is still covered under yours. Some health plans make it complicated for a college student to receive treatment out of state, for example. If you have to get a referral for out-of-network care, it may be too complicated for you child to receive treatment while at school. In those cases, it’s useful to supplement your child’s medical coverage with a college plan that makes getting treatment easy.
You may be wondering if your child is covered when he or she is home on holiday or summer break. Different college plans handle these situations differently, so be sure to inquire about these times before you sign-up. In general, most college health plans allow coverage for out-of-state providers, but they will not cover 100% of the charges. Much like a PPO health plan, the college plan will only pay something like 70% of the charges and a deductible will have to be met before coverage kicks in. That way your child still has some coverage while away from school. Of course, if your child remains on your health plan, these times will already be covered.
When deciding whether a college health plan is right for your child, be sure to examine the coverage closely. Check if pre-existing conditions such as asthma will be covered. Check how emergency room visits are handled. Find out what is available for free at the health center. College health plans are usually a cost-effective and convenient choice for college students, but you have to make that decision based on your child’s needs.
There was a time when health insurance was a luxury for average people, but that time has long since passed. These days health insurance is a must. Costs for medical care are higher than ever. Without health insurance, an accident or illness could seriously compromise your financial future. Moreover, having access to quality health insurance can help keep you healthier overall.
Sorting through health insurance quotes is no easy task. There are literally thousands of different plans out there for you to choose from. By far the easiest way to get good health insurance is through your employer or your spouse’s employer if you are so lucky. Group insurance plans are practically always the most cost-effective option; so if you have one available to you, take it. If you are self-employed, unemployed, or work for a company that doesn’t offer health insurance benefits, you’ll have to buy an individual plan.
In general, there are two main types of health insurance plans: indemnity plans and managed care plans. Indemnity plans are the more expensive of the two because you have a lot of freedom to choose your health care providers. These health insurance plans typically feature high co-pays and high deductibles. Preventative care, mental health care, prescription drug coverage, vision care, and dental care are usually excluded from indemnity plans unless added on.
Managed care is the most common type of health insurance these days. There are many different levels of managed care, and some plans incorporate features of indemnity coverage to add flexibility. Managed care plans include health maintenance organizations (HMOs), point of service plans (POS), and preferred provider organizations (PPOs). Typical characteristics of managed care health insurance include low co-pays, low deductibles, and a network of preferred or mandatory health care providers. Preventative care, prescription coverage, mental health care, vision care, and dental care are often included in the coverage. Some managed care plans, however, require pre-authorization of services.
Choosing the right health care plan for you and your family can be a complicated process. It’s not enough to choose the plan with the cheapest premium, because you could end up paying a lot more out-of-pocket expenses if the services you need are not covered. The best way to shop for health insurance is to get a variety of health insurance quotes from different insurers. Try to compare apples to apples by creating a list of benefits you and your family must have and looking for plans that satisfy those requirements.
When evaluating different health insurance quotes, there are three areas you should consider: benefits covered, applicable restrictions, and total costs. Most health insurance quotes include doctor’s visits, hospital visits, and surgical fees as standard benefits. Preventative care, vision care, etc. are considered optional benefits that may or may not be included. Pay attention to the maximum pay out of the policy as well. Determine if you can live with the restrictions of the policy. If you have a current doctor you would like to keep seeing who is excluded from a managed care network, that managed care plan may not be the one for you. Finally, consider cost. The total cost of an insurance quote is not just your premium, but how much money out-of-pocket you’ll have to pay in co-pays, deductibles, and uncovered services. This can be hard to evaluate, but it’s the most crucial factor to consider when evaluating health insurance quotes.
Buying and maintaining affordable health insurance can seem like a daunting proposition. With so many options to choose from and countless figures associated with each policy, it can sometimes seem as though you need an M.D. simply to make sense of it all. Thankfully there are some basic tips you can use for guidance along the way.
1. Know your health. Buying health insurance is confusing enough without having to wonder what those physicals will find. If you haven't been to a clinic for a checkup in the last several years, you may want to get a detailed overview before you begin shopping. Often just by getting your blood chemistry and a few other key indicators, you can save yourself considerable time down the road.
2. If you have a pre-existing medical condition such as diabetes or hypertension, you may have trouble getting affordable health insurance. Do not give up, however – these days a number of boutique insurance companies specialize in insuring people with certain disorders. Even if you believe you will never be able to find annual fees that suit your budget, a little research is bound to discover at least one or two companies who offer a higher standard of care and support. Needless to say, you want to avoid the major insurance companies for the same reason.
3. Ask your existing doctors and specialists whether they belong to any group plans such as HMOs or PPOs. You may not have anyone in your Rolodex if you have avoided medical care during a period of unemployment, but it is always wise to look ahead and anticipate the people you expect to visit. This includes psychiatrists, chiropractors and countless other subspecialties, so make a list of your ideal caregivers. Even if you cannot think of anyone offhand, most experts recommend calling a local treatment center and seeing what kind of insurance they offer the best rates with.
4. Look for group plans, even if you're between jobs. Too many people assume that if they have lost their jobs, few options exist for affordable health care. Not so – today a growing stable of trade groups, guilds and unions have sprung up to help people who may be out of work or self-employed. It's not unusual for major insurance companies to offer outstanding rates to group plans such as these, so you may save thousands each year just by joining up. The last thing you want is to pay out of pocket just because you freelance, so look for like-minded people in your area to see what's possible.
5. Another good option if you have recently terminated at another job is to take advantage of the Consolidated Omnibus Budget Reconciliation Act, or COBRA. This legislation stipulates that employers must provide you with supplemental health insurance for up to a year after you leave the job – not a long term plan, perhaps, but a welcome buffer if you do not relish the thought of spending weeks without a safety net. Most employers will extend COBRA benefits automatically, though some may require proof of employment and recent health records. Be prepared to produce all this information if you want to avoid lag times.
6. Decide whether you want to go with a Preferred Provider Organization (PPO) or a Health Maintenance Organization (HMO). Each offers different pros and cons, but the difference boils down to a simple question of access versus cost. PPOs are popular because they allow you to seek care outside your original health network, albeit it at an increased deductible and copay. HMOs, on the other hand, only cover caregivers within the network – but they may offer significant savings if you don't foresee the need to travel outside your plan for treatment.
7. Shop around! Health insurance companies are notorious for the widely divergent algorithms they use to determine your premiums. If you are unhappy with the prices at one, be sure to collect several more estimates before you commit to any plan. It's not unusual for two companies with the same data and case history to vary as much as 50 percent from one another, so you owe it to yourself to get a boarder overview. Don't just limit yourself to major providers either – a number of low-volume insurance companies offer special deals that may benefit people in your neighborhood or profession.
8. Be sure and check the copays on any medications you are already taking. Too many people forget this step, only to find themselves astonished by their first trip to the pharmacy. You may also want to look into the difference in cost for brand-name versus generic drugs – sometimes you can find a steep discount by switching to a medication only one provider covers. When in doubt, ask a customer service professional about your precise medication and dosage, as you want to get a specific number nailed down before you sign.
9. Save by combining health care policies with family members. It is a well-known fact that married couples enjoy less expensive health care premiums than their unmarried counterparts, but you may be able to save further by putting the whole family under a single umbrella plan. Spouses and children help distribute the risk for insurance carriers, giving them greater incentive to match or beat the other estimates you have seen. You may also be able to combine health insurance with life insurance to create an overarching combined policy – again, the premiums here will inevitably drop as you fold more coverages in.
10. Take care of yourself. This is perhaps self-evident, but it remains of paramount importance to individuals who see themselves switching carriers sometime in the future. Try quitting smoking, losing weight, increasing your exercise and otherwise taking daily steps to improve your health. It is a simple fact of the insurance business that private companies work for profit – if you can minimize the risk they take in covering you, you can expect to pay far less money over the course of your lifetime.
Q: Is there any way I can lower my rates for homeowners insurance?
A: Many insurance companies offer better rates on homes that are more modern and present fewer hazards. Insurance companies look at the property in question and calculate the possibility of a payout. A house with modern electrical and heating systems are low risk, and an insurance company will charge less for a modernized home than one that is older whose systems have not yet been upgraded. Some insurance companies also give discounts for theft prevention techniques, such as upgraded security systems or a dead bolt lock on the door.
Q: If I file a claim, will it affect my rate?
A: Homeowners insurance is very similar to auto insurance on this point. Most companies claim to give some leniency for the first claim but reserve the right to raise the rate if they deem it necessary. If an insured individual files more than one claim during a certain period, that individual’s rates will most likely increase for the next insurance cycle. If there are rate increases, an insured individual should not feel obligated to stay with any particular insurance company; it is often times best to switch insurance companies from time to time.
Q: Does homeowners insurance cover flood damage?
A: Because flood damage is so infrequent, the majority of homeowners insurance policies do not cover it. Federal law requires people living in certain areas of the country that are subject to catastrophic floods to hold some type of flood insurance. These required flood insurance areas are labeled as federal flooding areas. It is a good idea to look into flood insurance in order to protect your external property (the house itself) and internal property (your possessions), both of which could be significantly damaged, destroyed, or lost during a flood. Flood insurance is relatively inexpensive for the possible payout that it could provide.
Q: If I own a house, am I required to hold homeowners insurance?
A: Unlike auto insurance, homeowners insurance is not required to own a home. Most financial institutions will require some type of insurance while you are paying off a loan, especially if there are common natural disasters (flooding, earthquakes, tornados, etc.) in the area where the property and the home are located. Although it is not required to hold homeowners insurance, after the loan has been paid off, it is generally a good idea to keep the insurance to help protect the property as an investment.
Q: What type of insurance do I need for a condo or a co-op?
A: There are two types of insurance that are required when renting a condo or a co-op. The first is a master policy, which is generally created and provided by the condo or co-op board. This policy consists of shared parts of the property, such as walkways, roof, boiler room, etc. The second policy is your own insurance policy. This should cover structural improvements or problems caused by fire, theft, or other disasters. The policy should also cover all property or possessions within the condo or co-op and should also include liability in case a guest or tenet is injured on your property.
1. Homeowner’s insurance and title insurance are two terms that are often confused. Homeowner’s insurance covers damages to your property and your possessions and any liability of a guest on your property. On the other hand, title insurance protects your ownership of the home and investigates the title to determine if the title is valid and without encumbrances or defects. Title insurance is generally required by lending institutions if you use a loan to purchase a home. Whether a lending institution requires you to purchase title and homeowner’s insurance or not, you should consider purchasing both types of insurance to sufficiently protect yourself and your property.
2. Homeowner’s insurance policies cover your possessions in your home. Generally insurance companies create categories of items and assign a certain dollar limit to each category. However, if you have possessions in one category that exceed the limit on the category, you can purchase a rider to the policy to increase the limit on that specific category. Riders come at an additional cost, but they ensure that your possessions are sufficiently insured in your home.
3. If you own additional properties besides the one that you reside on, you can purchase riders on your homeowner’s policy to cover those properties. These riders are called income property riders. As a general rule, you should purchase insurance for properties that you rent out to protect the property itself from renters that damage it and to protect you from liability suits from your renters or your renters’ guests. You can also purchase secondary residence premises endorsement insurance to cover vacation homes or a home that you reside in during a part of a year. Adding second homes to your existing homeowner’s policy opposed to creating a new policy is generally more economical.
4. Homeowner’s insurance policies can also cover vehicles that are stored at your home. These vehicles include watercraft and other recreational vehicles. These vehicles are generally not included under auto insurance policies. You can purchase a rider to your homeowner’s policy to protect against the loss of any of these vehicles. However, if you use these vehicles often, you might consider purchasing insurance for them on a separate plan. Such a plan would already cover loss and theft, generally the only coverage option available for these types of vehicles under homeowner’s insurance.
5. If an item on a neighbor’s property does damage to your property (such as a tree falling and damaging a fence or a deck), your neighbor’s homeowner’s policy should cover the expenses. When an individual purchases a homeowner’s policy, it not only covers the individual’s property and possessions, it also covers damage done to third parties. Therefore, when the neighbor’s tree fell and damaged your fence, your fence should be covered by their policy. If something on your property is damaged by your neighbor, you should contact your insurance company and inform them of the damages. In some cases, your insurance company may initially fix the damage done to your property and then have your neighbor’s company reimburse them.
6. Your possessions are covered to a certain dollar amount under your homeowner’s insurance policy. The question is, when you go on vacation, are those items covered? Policies vary from company to company, but the general answer is yes, homeowner’s policies that cover your possessions in your home also cover those same possessions if you take them with you while you travel. If you have possessions that are extremely valuable, like jewelry or rare items, you can add a rider onto your homeowner’s policy that can extend your coverage to cover the cost of such items. However, in some cases where some possessions are extremely valuable, it might be wiser to just buy separate insurance.
7. Insurance companies generally insure a home for 80 percent of its value. When you are purchasing insurance, you should determine whether 80 percent would be sufficient: you do want to be underinsured if your home is damaged heavily or destroyed. You may consider purchasing a policy that covers 100 percent of your home’s value and then offset the premium price by raising your deductible. If your home was damaged heavily, you would spend less if you had a higher percentage of your home covered by had a higher deductible than if you had a lower percentage of your home covered, had a lower deductible, and then had to pay out-of-pocket for the percentage of your home that was uninsured.
8. Before you purchase homeowner’s insurance, you should determine how much you should insure yourself for in case of a third-party accident on your property, in other words, liability. Determine the amount of your assets, and if a large judgment was issued against you in a liability case, how much insurance you would need to protect your assets. You should think about protecting your business and investments and then purchase insurance accordingly.
9. Many factors go into pricing premiums for homeowner’s insurance. There are a few factors that you have little control over that determine the premium: the material used to build the home (brick, wood, stucco), your home’s closeness to a fire station (the better the fire protection, the lower the premium), the age of the home (old buildings may be against building codes), and the location of the home. Factors that you can change to determine the premium include the deductible amount (the higher the deductible, the lower the premium), the amount of riders you have attached to your policy, and the amount and type of coverage.
10. There are several different types of homeowner’s insurance packages. Basic packages include protection from fire, lightning, windstorms, explosions, riots, aircraft, vehicles, smoke, vandalism, theft, and volcanoes. More broad packages include protection from all the previous incidents and then further protection from damages caused by falling objects, snow, water events (there are specific restrictions on this one), freezing, and electrical currents. There are several other packages available for homes that are older or that qualify as rental homes. Special riders can then be attached to policies to protect homeowners from specific damages.
Renting out real estate in any form, be it an apartment, condo or freestanding structure, comes with its own set of risks. Unlike traditional home ownership where your chief concern is damage to the things you own, rental home insurance tends to focus more on property and injury liability. Conventional home insurance scarcely begins to cover the sort of issues you are likely to see as a de facto landlord, which is why rental property insurance has become such a popular choice. If you have found yourself struggling to find the perfect policy, you may be heartened to know this industry is actually pretty simple.
Most rental property insurance begins with similar damage coverage as traditional homeowner's insurance. That means you can choose either a "named perils" or "open perils" policy – the kind that comes with regular premiums and a fixed deductible. Depending on that home's location and the kind of abuse it is likely to see, you may also want to purchase additional catastrophic coverage for mudslides, earthquake or flood. Which possessions you list on the policy is largely a question of how you intend to manage the property as well – fully furnished living spaces will need more coverage than basic lofts, for instance.
Equally important is an airtight and comprehensive personal liability clause built into the policy. Conventional and first time homeowners often opt out of getting this kind of insurance, as they assume the chances of a guest injuring himself in the home are minimal. Not so with a rental property – you have no control over what goes on inside that home, and it's not unusual to see damages from such litigation stretch into six figures and beyond. Stick with policies that cover every type of injury and make special provisions for multiple accidents if you want to enjoy true financial security for years to come.
Finally you want to be covered in the event that one or more renters cannot meet the payment schedule anymore. Of course you assume some risk when you run credit reports and choose who will live there, but there is no reason to absorb the total cost in the event of a default. Sound property rental insurance usually comes with significant sums built in for events of this sort, so be sure and ask about so-called "loss of use" clauses from the beginning of this process. You may also want to clarify whether additional moving and cleaning costs can be counted against the policy in the case of an eviction.
Rental homes can represent steady profits and regular appreciation. If you want to maintain a healthy property and do not relish the thought of chasing residents for every little problem, it may be time to look into some of the top-rated property rental insurance carriers in this marketplace. Often with a little research and a good sense of what you want, you can zero in quickly on policies that meet your budget and needs in one fell swoop.
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