Do I need health insurance?

The answer to the question of whether or not you need health insurance is almost always yes. Unless you are a billionaire and have more than enough money to cover any medical bill that could possibly arrive, health insurance is a good idea. No matter how young or old you are, how healthy or unhealthy you are, how much you dislike insurance or hate going to the doctor, you probably need health insurance. The benefits of health insurance may seem mundane; most people just save a little bit at the doctor here and there and don’t experience much savings, if any, from having health insurance. However, the greatest benefit of health insurance is that it covers you if you find yourself needing major medical care for whatever reason.

Without health insurance, what we think of as routine medical events, such as having a baby, could end up costing six figures if there are complications. It is impossible to predict when certain medical diagnoses will occur. A cancer diagnosis can happen to anyone at any time; treatments are always improving and your odds of getting a severe diagnosis may be low, but health insurance protects against those unknowns.

What type of health insurance do I need?

Health insurance isn’t always easy to understand and the options available may confuse you. While the available insurance options differ for everyone, there are two basic categories of plans to choose from: high-deductible health plans or traditional health plans. What is a deductible? This is the amount of money the policyholder pays before the insurance company starts paying benefits. The lower your deductible, the less amount of money you must pay before insurance kicks in. High-deductible plans have higher deductibles when you need care, but your monthly premium is generally lower. For 2024, a high-deductible health plan is any health insurance plan where the annual deductible is $1,600 or greater for single coverage or $3,200 or greater for family coverage. Additionally, annual out-of-pocket expenses must not exceed $8,050 for single coverage or $16,100 for family coverage.

High-deductible health plans (HDHP) come with the added benefit of HSA eligibility, which is one of our favorite retirement savings vehicles. If you are healthy and not expecting any medical expenses outside of a few visits to the doctor, an HDHP may be worth considering. Even though you will pay more if you experience a major medical emergency, an HDHP is infinitely better than not having any health insurance. Plus, choosing a higher deductible plan may save you money each month on premiums and give you the option to invest in the extremely powerful HSA.

Major medical needs can’t always be predicted, but some, like having a baby or opting for an elective surgery, can be. If you are generally healthy but will experience one of these events in a given year, it may be worth opting for a traditional insurance plan with better coverage, at least temporarily. The additional monthly cost may be worth the savings you get if you were to reach your deductible or out-of-pocket maximum. If you have medical conditions that require a great deal of care or are at an age where your medical expenses have increased significantly, a traditional health insurance plan may be the right choice for you.

How can I save money on health insurance?

Choosing the right type of health insurance plan for you and your family can help you save money by minimizing premiums, or if you have more medical expenses, maximizing the amount that insurance will cover. But insurance may still seem very expensive even after picking the right plan for you. Is there anything you can do about it?

Unfortunately we can’t fix the health insurance industry in the US, but you may have some options to make your plan more affordable. If you have health insurance through your employer and it isn’t working out for you or your family, try talking with your employer or HR to see if there is any possibility they may add additional health insurance options in the future. It may be worth looking at options outside of your employer and shopping around to see what else is available. Be wary of certain health share plans that aren’t actually insurance and aren’t subject to the same regulations. These plans can be less expensive, but aren’t legally required to pay claims and have other drawbacks such as limited or no coverage for preexisting conditions.

Make sure you know the ins and outs of what your plan covers so you know the best, and financially optimal, ways to seek the medical care you need. It may be cheaper to use a service like GoodRX to fill prescriptions instead of billing them through your insurance.

Nobody enjoys paying for medical insurance. Chances are you are paying for significantly more than you are receiving, but if you are one of the “lucky” ones who receives more benefits than they pay for, you are likely experiencing a major medical event and it’s pretty hard to be grateful for insurance coverage under those circumstances. No matter how much you dislike health insurance, you can’t go without it. Over 60% of personal bankruptcies are partially or totally caused by medical debt. Choosing the right health insurance plan for you and your family has the potential to save you money and give you access to super-powered tools like HSAs, but can also help put your mind at ease knowing an unexpected medical emergency won’t destroy your finances.

Throughout every decade, there are different areas of your financial life that come in and out of focus. In this episode, we’ll discuss what you need to focus on by age, pitfalls to watch out for, and how to know you’re doing it right.

In this episode, you’ll learn:

• The five tiers and considerations of the financial planning pyramid (cash flow, risk management, investing, tax planning, and estate planning)
• What each tier should look like at your age (20s, 30s, 40s, and 50s)
• Common pitfalls and missed opportunities in each decade

Research and resources from this episode:

• Bankrate’s 2023 Annual Emergency Savings Report
• NAR Finds Shares of First-Time Home Buyers Smaller, Older Than Ever Before
• Most Used Cars Are Now Selling for Less than MSRP (Jalopnik)
• 15.7% of New Car Buyers in Q4 2022 Paid Over $1,000 Per Month (GM Authority)
• State of the Automotive Finance Market Q3 2022 (Experian)
• Job unhappiness is at a staggering all-time high, according to Gallup (CNBC)
• 43 Incredible Job Satisfaction Statistics (2023): Average Job Satisfaction in the U.S. (Zippia)

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There are certain things everyone needs to know about money. High school personal finance classes are still uncommon, and most Americans are financially illiterate and more prone to making money mistakes due to a lack of knowledge. Here are some common financial mistakes you may be making right now and how to avoid them.

1. Not saving or investing

Perhaps the biggest financial mistake you can ever make is not investing for your future. 19% of Americans don’t save any money at all. Not saving puts your financial future and retirement in jeopardy. If you don’t save at all or don’t save adequately, you may never retire or you may be forced to live on Social Security payments. The younger you start saving, the more time your dollars have to work, but it is never too late to start saving more for your future. Even if you are close to retirement and realize you didn’t save enough, every little bit saved for retirement helps.

2. Paying off debt too early

Paying off debt isn’t what you would normally call a mistake, but prepaying low-interest debt when your Army of Dollar Bills would be better used elsewhere could be a costly mistake. Certain low-interest debt, like auto loans, should be paid off in a timely manner since vehicles are typically fast depreciating assets. If you are young with lots of compounding growth ahead of you, it may not sense to pay off your low-interest mortgage as quickly as possible when those dollars could instead be saved in a tax-advantaged retirement account and multiply many times over. Follow our “Financial Order of Operations” and make sure every dollar is working as hard as you are.

3. Not properly covering your risks

Don’t let unexpected events make or break your financial future. Having your risks properly covered is a vital part of any solid financial strategy. All it takes is one car accident or one visit to the hospital to completely derail your financial life. In such uncertain times as this, it’s even more important to make sure your risks are covered. If you don’t have a full 3-6 month emergency fund, work on ensuring you have enough liquid savings to cover your highest deductible. Adequately covering your risks will help keep you from making other financial mistakes in the future, like racking up high-interest credit card debt.

4. Racking up too much debt

Not all debt is bad, but it is unfortunately easy to reach a level where you are in over your head with debt. For students going to college, student loans may be necessary to get an education, but keep your student loan debt below your expected first year salary. Know how much mortgage you can afford; your total housing-related payments should not consume more than 25% of your gross monthly income. Car loans are sometimes necessary to ensure you have reliable transportation to work, but follow the 20/3/8 rule when taking out an auto loan: put 20% down, pay the car off in 3 years, and your monthly payment should not exceed 8% of your monthly gross income. If you are purchasing a luxury car, you should have it paid off within 1 year. With your deductibles covered and an emergency fund, credit card debt shouldn’t exist.

5. Overspending

It’s hard to have any financial success at all when you can’t control your spending. Overspending can be a problem for any level of income, no matter how much money you make. There will always be someone out there who has nicer things than you, and there will always be things to spend your money on. Instead of focusing on what others have and what you don’t, try spending time volunteering. A little generosity goes a long way, and focusing on what truly matters can help curb any bad financial behaviors like overspending.

6. Not knowing your “why”

Financial success alone will not bring happiness. Many people who pursue financial success become extremely unhappy when they reach what they thought was the finish line and realize there isn’t enough money in the world to make them truly happy. No matter where you are at in your wealth-building journey, take some time out of your day to think about why you do what you do. Accumulating wealth for the sake of accumulating wealth will not make you truly happy, and may in fact make you unhappy.

In our latest episode, we discuss “5 Things Every American Should Know About Money!” This is your chance to refresh your memory on some of the basics of building wealth. We discuss the power of deferred gratification, why everything you know about money is wrong, the value of time, and more. Watch it now on YouTube below.

There are some obvious financial dangers you could face during this pandemic, like the danger of losing your job and being unable to afford the basics. We think there are also some other less obvious financial pitfalls you could experience during the pandemic. Whether or not you’ve lost your job or are severely impacted by the pandemic, make sure to avoid these pandemic pitfalls.

Payday loans.

Payday lenders are targeting consumers financially hurting from coronavirus. Americans that recently lost their job or are experiencing a loss of income are more likely to need the type of quick cash that a payday lender can provide. If you are in need of financial assistance, explore other avenues before you consider borrowing money. You may be able to make money in other ways, like picking up a side hustle or selling some of your stuff, or cut back on expenses to make ends meet. Some payday loans are hard to spot and masquerade as legitimate financial aid; some payday lenders offer assistance with rent, for example, but charge exorbitant interest rates.

Not saving for retirement.

Dire financial circumstances may force you to decrease your savings rate, but it’s important to keep contributing to your retirement accounts, even if you are forced to cut back some. When the stock market is down, invested dollars become that much more powerful. One of the last things you want to do is stop investing in your future. As we often say on the show, the younger you are, the more powerful your dollars. If you have the discipline to consistently save and invest even when the market is experiencing volatility, your future self will thank you. 

Racking up debt.

If you aren’t making the same amount of money you were a year ago or even a few months ago, it’s easy to fall into the trap of high-interest debt. If you are having trouble paying the bills every month, look for ways you can cut back and stay afloat instead of going into debt; it may be time to downsize your life. Going into debt, especially high-interest debt like credit card debt, can happen in an instant and take years to pay off. At a minimum, you need to make sure you have enough saved to cover your deductibles. If your car breaks down or you have unexpected medical expenses, you don’t have to go into credit card debt to pay for it. Appropriate cash reserves are there to protect you from life’s unexpected events, like job loss, auto accidents, and medical emergencies. An adequate emergency fund is designed to keep you out of debt.

Prioritizing your kids’ education.

Paying for your kids’ college or private school education is a worthy and noble goal, but you need to make sure you have your Financial Order of Operations right before thinking about paying for school. Your child may be eligible for scholarships, federal aid, or other financial aid to pay for college. If they do need to take out loans to pay for college, they’ll still have decades of compounding growth ahead of them by the time their loans are paid off. There are no retiree loans if you don’t save enough for retirement. Make sure you have your own financial future in order before worrying about the financial future of your children.

Paying off your mortgage.

How can paying off debt be a mistake? Although shedding debt is a good thing, it may not be financially optimal to pay off your mortgage early. Make sure your dollars aren’t best deployed elsewhere, like in an emergency fund or in a retirement account, and follow the Financial Order of Operations. If you are younger with decades of compounding growth ahead of you, it may not make sense to prioritize paying off your house over other financial goals like saving for retirement. On the other hand, if you’re older and nearing retirement, you might want to make sure your house is paid off before you retire.

Not implementing appropriate risk management.

If you haven’t reviewed your insurance policies in a few years, it’s always a good idea to review your coverages and see if anything is missing. Review your life insurance need; not everyone needs coverage, and if no one is financially dependent on you or you are self-insured, you may not need life insurance. It’s important to make sure your estate plan accurately reflects your wishes, and if it hasn’t been updated in a few years you may need to make some changes if you’ve experienced any major life events.

The coronavirus pandemic poses risk to everyone, but we think there are different risks depending on your age. Check out our latest show, “Financial Pitfalls to Avoid During a Pandemic! (By Age),” for the risks you need to be on the lookout for during the coronavirus pandemic.

The Netflix documentary “Tiger King” is more than just a hilariously captivating hot mess. It’s a perfect example of what NOT to do with your personal finances. If Joe Exotic (and the whole cast) had followed the advice from this episode, their lives would have looked wildly different than they do today! Let’s have some fun and break down 7 fantastic personal finance lessons you can learn from this crazy show.

Warning: There are “Tiger King” spoilers in this episode!

In this episode, you’ll learn:

• Easy financial planning tips that could have saved Joe Exotic a lot of heartache and legal trouble
• Estate planning tips that would have blown the Carole Baskin/Don Lewis’ story wide open
• How to spot the “Jeff Lowe” in your life
• Why tiger cubs are a perfect metaphor for personal finance

Research and resources in today’s episode:

• Best Online Savings Accounts for April 2020 (Bankrate)
• Disability Statistics and Facts (Affordable Insurance Protection)
• Nearly 75% of parents help their adult children financially (USA Today)
• 68% of young people expect an inheritance, yet only 40% of their parents will leave one (CNBC)
• Tiger King: Murder, Mayhem, and Madness | Official Trailer (Netflix)

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