Custodial Vs. Skilled Care

One concerns the difference between “custodial care,” which helps a person perform various activities of daily living (see further down), and “skilled care,” which is medical care a person receives from doctors, nurses, therapists, and other skilled practitioners.

For more on this distinction, see the following video.

Care Environments

Further issues arise when you go to select your care environment.

The basic question is: Where do you want to be cared for?

For an introduction to some of the relevant concerns, see:

The two most fundamental places are (1) at home, and (2) in an institution.

“At home” might mean in your own private residence, someone else’s private residence, or in an apartment/independent-living facility.

Institutions vary depending on whether they provide Assisted Living or Skilled-Nursing Care.

Some institutions – like adult daycare, hospice, and respite care – are available to assist caretakers who provide mainly at-home services.

Others – chiefly assisted-living facilities and nursing homes – are designed for more intensive care.

What Are Institutional Costs Made up of?

When you think of costs, there are really three categories of cost that can contribute to a bill.

Residential Costs

This is basically room and board as well as meal-preparation services (if any).

Custodial Costs

These costs are associated with any help that a resident may receive with the six, so-called “Activities of Daily Living” (or ADLs). These include bathing yourself, feeding yourself, dressing yourself, remaining continent, toileting by yourself, and transferring in and out of bed by yourself.

Skilled-Nursing Costs

These costs are those that attend the reception of various medical interventions. This may include the administration of pharmaceuticals, physical and speech therapies, wound dressing, and so on.

How Much Do Assisted-Living Facilities and Nursing Homes Cost?

In the Greater St.-Louis area,[1] the costs vary widely, depending upon the amenities, location, and services of the facility in question.

However, for assisted living, we’re a talking about around $1,600 a month on the low end to about $4,000 or $5,000 a month on the higher end.

Nursing homes, which (in theory) provide an even high level of attention and care, cost anywhere from approximately $6,000 to $8,000 a month on the low end. Some nursing homes can run more than $10,000 every single month.

(I) – “Internal” Medicaid availability only. This means that the facility accepts Medicaid-eligible persons who began their time as private-paying individuals in the facility.

(W) – “Waiting List.” Many facilities probably have a waiting list. But I do not presently have data from all of them.

St. Louis Area Slightly Less Than National Averages

Nationwide, assisted-living costs have hovered around $4,000 per month, while nursing homes have been about $7,000-$8,000 a month – depending on whether the resident has a semi-private room (i.e., one shared with another person) or a private room.[2]

Still, $4,000 a month is $48,000 a year.

And $8,000 a month is $96,000 a year.

These are not small numbers.

The average nursing-home stay is about 2.3 years, or 835 days.

So, if you’re paying about $251 per day to a nursing home, that comes to $209,585.[3]

What to Do?

There are really only three (3) ways to pay for long-term-care expenses. (1) You pay out of your own pocket; (2) you “spend down” your assets and qualify for the government’s Medicaid-assistance program; (3) or you use proceeds from a long-term-care-insurance policy.

For a bit more on these, see this:

In another installment, I’ll get more in depth in terms of payment options.

For a no-cost, no-obligation review of your own situation, call (636)447-1169.

[1] Including portions of Franklin, Jefferson, Lincoln, Montgomery, Pike, St. Charles, St. Louis, and Warren counties, as well as St. Louis City. In terms of municipalities, we’re talking about Arnold, Ballwin, Barnhart, Bel-Nor, Bel-Ridge, Bella Villa, Bellefontaine Neighbors, Bellerive, Berkeley, Beverly Hills, Black Jack, Bowling Green, Breckenridge Hills, Brentwood, Bridgeton, Calverton Park, Champ, Charlack, Chesterfield, Clarkson Valley, Clayton, Cool Valley, Country Club Hills, Country Life Acres, Crestwood, Creve Coeur, Crystal Lake Park, Dellwood, Des Peres, Edmundson, Ellisville, Eureka, Fenton, Fenton, Ferguson, Flordell Hills, Florissant, Foristell, Frontenac, Glen Echo Park, Glendale, Grantwood Village, Green Park, Greendale, Hanley Hills, Hawk Point, Hazelwood, Hillsdale, Huntleigh, Imperial, Jennings, Kinloch, Kirkwood, Ladue, Lake Saint Louis, Lakeshire, Mackenzie, Manchester, Maplewood, Marlborough, Maryland Heights, Mehlville, Moline Acres, Moscow Mills, Normandy, Northwoods, Norwood Court, Oakland, Oakville, Olivette, Overland, O’Fallon, Pacific, Pagedale, Pasadena Hills, Pasadena Park (Village of), Pine Lawn, Richmond Heights, Riverview, Rock Hill, Shrewsbury, Silex, St. Ann, St. John, Sunset Hills, Sycamore Hills, Town & Country, Troy, Twin Oaks, University City, Uplands Park, Valley Park, Velda City, Velda Village Hills, Vinita Terrace (Village of ), Warrenton, Warson Woods, Webster Groves, Wellston, Wentzville, Westwood, Wilbur Park, Wildwood, Winchester, Woodson Terrace, and Wright City.

[2] Sometimes “private” bedrooms still share bathrooms with other residents.

[3] That is, $251/day * 835 days.

If you need immediately relief from your debt, then the three main options are these.[1]

Debt Consolidation

When you “consolidate” something, you bring many things together into one thing. In a nutshell, “debt consolidation” is where you bring many debts together into one. That’s going to be one big debt, for sure.

Essentially, you use one loan to pay for many (or all) other loans that you have.

So, the first step is that you take out one more loan, or open up one more line of credit, than you currently have. This may seem counterintuitive. But this new loan is calculated to serve a debt-reduction purpose. *If approved*, you use this new loan or line of credit to pay off other credit cards or loans.

Pros of Debt Consolidation

There are a number of things in favor of this approach.

After it’s successfully completed, you have one payment instead of several. This will simplify your budgeting and help you better manage your finances moving forward.

Additionally, consolidating can accelerate your ability to pay your debts down – or off.

This is partly because, often, the consolidation loan will have a lower interest rate than (at least some of) your other debts. It’s not uncommon for department-store credit cards to have interest rates around 25-30%. Consolidation loans seem to average between 10-20%. (I can sometimes dip below 10%. On the other hand, some companies seem to try to levy almost as much interest as a department-store charge card! Be wary.)

So, this is a savings. A bit of a savings.

Finally, since all you’re doing is borrowing money and paying off loans, you’re using credit to fix a credit problem. (In theory.) Therefore, you don’t take (as big of) a hit on your credit report. You might see a slight reduction in your score. But, in the long haul, you may end up a lot better off.

Cons of Debt Consolidation

You have to be approved.

This means that your credit has to be in fair to good shape. We’re usually talking about scores somewhere between 600 and 700.

The lower the score, predictably, the higher the interest rate. That’s how the game is played, my friend.

According to Experian’s website, theoretically, credit scores could be as low as 300. Now, with a score that low, you are unlikely to be approved for any credit at all. But even scores in the 500s are considered pretty bad. So, unfortunately, a fair number of people seeking credit-debt relief may be unable to avail themselves of the consolidation option.

A further point to consider is that consolidation loans require collateral.

For those whose financial vocabulary might be a little impoverished, “collateral” is what you put forward as “security” when you take out a loan. It’s something – often real property, like your home – that you promise the creditor can take from you if you fail to make your payments. (Failure to make payments on time is called “defaulting.” …Except in the case of student loans repayments, where it could possibly be termed “forebearance.” It’s as clear as mud, right?)

Another negative is that many of your credit lines remain open and – IF YOU ARE UNDISCIPLINED – the consolidation loan can simply ignite a further spending spree.

Realize that, if this happens, you won’t just be back to square one. You could theoretically end up with double the amount of debt as before! That is: You could end up with the consolidation loan PLUS credit cards and loans maxed out from fresh spending.

So, just as freeing up money doesn’t do you much good if you don’t have a plan for using the dollars that you save, so too, consolidating your debt doesn’t do you any good unless you have a plan for paying the consolidation loan AND freezing whatever spending got you into credit trouble in the first place.

Remember how I mentioned that this really cannot be accomplished without discipline?

Debt Settlement

An alternative to debt consolidation is debt settlement.

This approach is where someone – either you yourself or some professional arbitrator/negotiator – gets your creditors to agree to accept less than the full amount that you owe. But, here’s the kicker: If the negotiation is successful, then the reduced balance is considered to be a total payoff of the debt.

I actually did this myself.

I owed approximately $15,500 on a credit card. The company agreed to settle with me at 59%. So, I paid around $9,100, and the card balance was considered paid in full.

It turns out that you don’t need to go through a settlement company. You can negotiate yourself. This works best if you have a lump sum of cash that you can settle with.

If you are looking to negotiate new payments, then you might employ a company.

Pros of Debt Settlement

Without question, a settlement can save you a lot of money.

This is the main benefit. And you really can’t gainsay it.

Cons of Debt Settlement

If you go through a debt-settlement company, then you can expect to pay a fee. Sometimes, the “fee” is a percentage of the total amount of debt that you owe. This number can range widely. I’ve seen figures between 10% on the low end, all the way to 30% or more on the high end.

Moreover, debt settlement does have a negative impact on your credit score. Your actual impact will vary. It partly depends on other elements of score – including what the score was before the settlement, your payment history, the length of time you’ve had credit lines open, and so on. But estimates are that your rating could be adversely affected by anywhere from 75 to 150 points on average.

“Strikes” against your credit remain on your report for around seven years.

So, debt settlement is a better option for people who already have a low credit score to begin with.

Finally, expect to be “1099’ed” for the amount that the credit company writes off.

In my case, if I had $15,500 in credit-card debt, and I settled for $9,145 (let’s suppose), then I will expect to receive an Internal Revenue Service (IRS) form 1099MISC for the difference: $6,355.

Why?

Well, you don’t pay taxes on money that you’re loaned.

Most people pay their loans down (or off) with money they obtain as regular income. And you’re taxed on regular income.

So, you might put it this way.

You are taxed as you pay the loan back.

But when a portion of your debt is written off, the IRS considers the written-off amount to be money that you received and used but were never taxed on.

I know, right?

The upshot is that you should expect to have to report the written-off portion of your debt as regular income the next time you file your income taxes.

Click HERE for a strategy that might help you to offset that extra reportable income.

Debt Counseling

If you need help being – or staying – disciplined, then you might want to see credit counseling.[2]

One of these is run by the National Foundation for Credit Counseling, a nonprofit financial-counseling organization. You can reach out to the folks at the NFCC by clicking HERE or by calling their toll-free number: (800)388-2227.

Of course, there are a few books and videos that you might want to check out as well.

I list my top picks HERE.

Reach out for Personalized Attention

I’m no expert, but I have a bit of experience.

For a no-cost, no-obligation review of your situation, call (636)447-1169.

[1] In theory, there are numerous ways to get out of debt. Other authors mention things such as borrowing from family or friends, using credit-card balance transfers, availing yourself of Home-Equity Lines of Credit (HELOCs), and taking out personal loans. In future articles, I may tackle some of these.

[2] I should also add that there are debt-management programs around, too.

It has been well said that, in our culture, there is a palpable pressure to buy things you don’t really need, with money you don’t really have (hint: credit), to impress people you don’t really care about anyway.

And who benefits?

Credit-card companies, for one. (For more on that theme, see my debt-relief-themed book-and-film list, HERE.) Mortgage companies. Pay-day loansharks. In a word… lenders benefit.

How do you get out from under their thumbs – not to mention the crushing mountain of bills and past-due letters?

Here are a few suggestions.

(1) Budget

I know. It’s not fun.

Then again, being in debt isn’t exactly a picnic, either.

Peter Drucker, the late 20th-century business strategist and educator, once opined that “If you can’t measure something, you can’t improve it.”

An oft heard corollary is that “You improve what you measure.”

The upshot is that tracking how your money comes and goes is really non-negotiable if you are serious about getting out of debt.

You can do it yourself with an Excel spreadsheet, if that’s your thing – or with paper and a pencil, if it’s not.

There’s also a website that can do all the heavy lifting for you.

For more on that, check out Mint.com.

(2) Arrange for Payment of ‘M.U.G.’ Expenses

There are some bedrock expenses that are just a part of life.

Many authors speak of these as your “M.U.G. expenses”:

Mortgage (or rent) payment – that is, living-arrangement costs; shelter

Utilities – all the necessities of modern life (electricity, gas, sewer, trash collection, water; possibly also cable, cellular, telephone, etc. …more on which in a moment)

Groceries – food (period)

You need to have food and shelter. You have to get it somewhere.

Now, there can be a conversation about where you live and what you eat.

For instance, if you’re living in a mansion and looking for loose change in between sofa cushions at the end of the month, maybe it’s time to downsize. Or if you eat out every day, even as your credit card is inching closer and closer to being maxed out, then maybe it’s worth spending more time on meal preparation in your own kitchen.

There can also be a conversation about what utilities actually constitute “necessities.”

For some people, internet service is a luxury. For example, if you’re internet service supports your habit of binge-watching NetFlix shows, then maybe it would be worth you giving it up for a few months, while you tried to get back on your feet.

On the other hand, if your internet service is to give you the ability to take online classes or work from home, then it could be a necessity.

That gym membership? Maybe it’s a luxury. if you make your living staying fit, however, maybe it isn’t.

I can’t complete the “necessity analysis” for you. But, I would encourage you to be honest with yourself. Don’t succumb to the temptation to call something a “necessity” just because you really, really want to keep it.

It comes down to what you want more: financial freedom or some good or service. It’s up to you!

(3) Prune Unneeded Expenses

Once you’ve identified unnecessary expenses, the next step is to get rid of them.

This is easier said than done. I get it.

But, when your income is less than your expenses, there are really only three ways to improve your situation.

Way #1: Cut expenses.

Way #2: Increase income.

Way #3: Cut expenses AND increase income.

As much as we might love to do it, it’s not like you can just choose #2, wave a wand, and solve your troubles.

So, for many people, option #1 is the obvious go-to solution. At least… to start with.

Do you go to Starbucks for morning coffee runs? Or do you brew your own at home – or drink coffee at the office?

I don’t want to repeat the point about budgeting. But you need to realize that those dollars add up.

$5 per day, five days a week for, let’s say, 50 weeks out of the year comes to $1,250 for 250 cups of coffee.

A 25 oz. container of coffee from the grocery store might run you between $10 and $25 bucks. And, if the labels are to be believed, those containers can usually support between 200-250 8-oz. cups of coffee – each. Not factoring in your cost of water and electricity to run the coffee pot. And if you don’t have a coffee maker, you can buy one for between $25-$50. Even if you had to buy a couple of cans of coffee and a coffee pot, you’d still likely save more than a $1,000 over the course of the year just brewing your own coffee at home compared to what you’d spend buying just one cup every day.

I can’t tell you how to spend your money or your time. I certainly can’t tell you what to value.

But, if you’re trying to get your head above water, financially, there are usually some expenses – like the coffee – that can be pruned, resulting in a sometimes-considerable saving.

(4) Don’t Make Unnecessary Purchases

This is obviously related to the previous point. But, I think it is possibly a bit different.

If you have NetFlix or Amazon Prime subscriptions, then, in a sense, you have committed to an expense. If you decide that you and your family would be better off without that expense, then you might prune it – per suggestion #3.

But, if you are considering buy a dog, or a new car, or if you are mulling over the possibility of starting a NetFlix subscription, then I would think of this as falling more under the category of #4.

I’ll just use the examples of the car and the dog.

To buy a car doesn’t just commit you to the purchase price, of course. You’ll pay sales tax. You’ll have to get the vehicle tagged and registered. You’ll need insurance. There will be gasoline. And there may be maintenance costs, depending on the age of the vehicle, your warranty, and so on.

Now… don’t get me wrong. Having SOME vehicle or other is – practically  speaking – a necessity for most families. How will you get to work or school without one?

I get that.

But sometimes the issue is getting a NEW car, when the old one still works.

I would think long and hard about taking on that new liability.

Or think about the dog. Lovable companion? Yes!

Expensive? Yes!

There will be food, health costs, shots, and so on.

According to Google, the average yearly cost of owning a dog is around $1,270 bucks.

The moral is: be wise about what you commit yourself to.

(5) Increase income

Maybe you’ve already cut expenses down to the bone.

You never eat out. You brew coffee at home. (And it’s a modest dwelling.) You don’t own a dog.

Your pantry is stocked with Ramen Noodles and your beverage of choice is tap water.

You rent DVDs from the library (driving there in a 10-year old vehicle that is paid off), and you don’t pay for NetFlix or Hulu.

And yet… you’re still past due on your electric bill.

What to do?

There are no easy answers.

Or… let me rephrase that. There perhaps ARE easy answers. I can say: “Increase your income.”

But there’s no easy way to implement that answer. “Okay. How??”

One possibility is to try to get a higher paying job.

Maybe you consider going back to school – or learning a higher-paying trade.

And that can be great. But it’s a solution for tomorrow – or the day after that.

That doesn’t help you now.

You might just post your resume on Linked In. Or take a few minutes every day to peruse ads on Indeed.com.

Who knows? Maybe you could a better-paying position without having to do anything other than look – and interview! – for one.

Apart from that low-hanging fruit, you could try to start a side job or a side “hustle.”

There are numerous websites that give lists of ideas.

Check out the following video, for examples.

But a few quick tips might be:

• Babysitting, house sitting, pet sitting.
• Do chores or odd jobs for people.
• Drive for Uber or Lyft.
• Try “flipping” items on Craigslist or Ebay.
• Sell some of your belongings.
• Donate blood plasma.

(6) Have a Savings/Investment Plan

You worked hard to bring in – or keep – more money. What comes now?

Know where your saved money is going. Plan it out.

Okay, picture this.

You managed to get a few more dollars “cash flowing.”

Maybe you slashed expenses. Maybe you have been working weekends starting a photography business.

Getting that extra cash flow is meaningless if you just fritter it away.

You have to have a plan for where to put every dollar that you save.

So, let’s say that you went from buying Starbucks every day to brewing coffee at home. And let’s say that you anticipate saving a little over a $1,000 because of it.

Are you just going to let that extra money sit in your checking account so that it gets autodrafted for bill 1, or so that you are tempted to go to the movie theater every weekend?

If you are intent on getting into a better financial situation, then your answer should probably be: No.

You need to have a pretty good idea of where each of those saved dollars is supposed to end up.

For example, $1,000 per year comes to around $20 a week, over 50-52 weeks.

That could be a deposit into an emergency fund. It could constitute your contribution to a Roth IRA. You could start an account with a brokerage firm. It could be an investment into a side business.

You get the idea.

Don’t just free the money up. Free the money up *to be used to improve your situation*.

(7) Don’t Neglect Your Credit

It’s bad to carry high balances on your credit cards.

Duh. Right? Nothing new, there.

But, closing your accounts isn’t necessarily the best answer either.

Remember the d-word from earlier?

DISCIPLINE.

I can’t really say it differently than this. There’s no way to use credit effectively without discipline.

See HERE for my quick summary of the good and bad ways to use credit cards. And click HERE for some tips for getting (and staying!) out of debt.

The MO Most Plan is similar to other 529s in that it has numerous tax advantages. Like Health Savings Accounts (HSA), 529s are often “triple-tax-advantaged.” One tricky thing with 529s is that you have to carefully track the difference between federal and state taxes![1]

Tax Advantage #1 – Contributions Deductible From Missouri-State Income Tax

Firstly, in principle, and if you are a Missouri resident, your contributions are deductible from your Missouri-state income taxes. The limits on deductions are liable to vary year by year. As of this writing, you can deduct up to $8,000 if you’re filing singly, and up to $16,000 if you are married, filing jointly.[2]

HOWEVER #1: 529 contributions are not deductible at the level of your federal income taxes. So, don’t get mixed up. When in doubt, consult a competent and qualified tax professional.

HOWEVER #2: If you if relocate out of the state, then your Missouri deductions go away.

HOWEVER #3: Your deductions may be “recaptured” down the road if you make a NONQUALIFIED withdrawal — that is, one that is not earmarked for a permissible educational expense. (See further on.)

How Long Do Funds Have to Remain in Your MO Most 529 Account Before They are Available for a Deduction?

Qualified withdrawals may be made immediately – subject to your contributing funds clearing their respective institutions. Your contributions may be deducted the tax year you make them.

Since the MO Most literature seems to place no restrictions on accessibility, the inference is that you can contribute day 1, withdrawal the funds “at any time,” and still get your tax deduction on the contribution — up to deduction limits, and according to the tax rules, of course.

Of course, run all this past your tax adviser!

Tax Advantage #2 – Earnings Grow Tax Free

Secondly, earnings — if there are any – will accrue federal-income-tax free.

I say, “if there are any” because your investment experience is, in part, a function of the investment selections you make as well as your actual, real-world market experience.

If you have monies invested in high-risk accounts, and the market downtrends, then you could experience a loss. Earnings are NOT guaranteed.

There are often ways to mitigate market risk, for example, by investing in low-risk, fixed-interest vehicles that are (at least somewhat) disconnected from the market. If you need advice, seek out a licensed financial adviser or investment consultant. Your earnings may or may not accrue state-income-tax free. It depends on where you live.

Again, ask a tax adviser.

Tax Advantage #3 – Qualified Distributions Are Tax Free

Thirdly, if you use the accumulated money in your MO Most Plan for a “qualified” educational expense, then you won’t pay federal income tax on those (qualified) withdrawals!

How Long Does Money Have to Remain Inside the MO Most 529 Plan Before It Is Available for a Qualified Withdrawal?

There appears to be no time limit on the accessibility of the money for qualified withdrawals, presently, provided that the funds have cleared.[3] That’s the in-principle answer.

In practice, there may be a seven- or nine-day wait for accessibility if you funded the account from a checking account or bank transfer, or if you recently changed your mailing address.

But, these latter restrictions seem to be due to Vanguard’s internal policies, rather than to state guidelines.

What Counts as a ‘Qualified Withdrawal’ From a MO Most 529 Plan?

Presently, it looks like many of the following all count:[4]

On the level of primary and secondary (“middle” and “high” school) schooling; that is, Kindergarten to 12th grade:

Tuition payments to parochial/religious schools, private schools, and public schools.

On the level of postsecondary (e.g., college/university) schooling:

Tuition; some room and board costs and miscellaneous fees; school supplies (including books and even computers — if these are used by the student for his or her education).

Disclaimer

I am not a tax professional and I cannot give tax advice. This article is for general information or entertainment purposes only and should not be construed as financial, investment, or tax advice of any kind. For personalized or specific advice – or if you are not a Missouri resident or taxpayer – then please consult a licensed tax preparer who is knowledgeable about the Missouri Most 529 Plan.

For a no-cost, no-obligation review of your insurance situation, contact (636)447-1169.

[1] For more, see https://cdn.unite529.com/jcdn/files/MOD/pdfs/programdescription.pdf.

[2] See https://www.missourimost.org/home/faqs/getting-started.html.

[3] See https://www.missourimost.org/home/faqs/managing-your-account.html#how-soon.

[4] See https://www.missourimost.org/home/basics-of-529s/529-basics.html.

A person who is living paycheck to paycheck is one who literally must receive each new paycheck simply in order to pay his or her costs of living.

Two Consequences of Being Paycheck to Paycheck

Firstly, if you’re living paycheck to paycheck, then it’s difficult to find the budget to purchase things such as life-insurance coverage.

But, secondly, if you and your family depend on a consistent paycheck just to meet basic living expenses, then what happens if the breadwinner dies or becomes disabled?

There’s a tremendous pressure, then.

The very families that desperately need life-insurance protections for their families are often the families that cannot afford the coverage.

Living this way is unsustainable in the long run. It’s a disaster in the making.

How Can You Avoid Tragedy?

If your expense-to-income ratios are unfavorable, you have only four basic options.

(1) Do Nothing

Obviously, this option will leave you and your family in the same precarious situation you’re already in. In this position, it’s not a matter of if the bottom will fall out from underneath you; it’s simply a matter of when it will happen.

(2) Increase Income

Indeed, this is a possibility in “logical space,” as it were — meaning, it is at least an abstract possibility. But, it can be extremely difficult to implement in practice. Maybe your industry is saturated or on the decline.

And perhaps you’re faced with the prospect of having to spend money just to get ahead. This might be because you need to relocate to find work, or because you require higher levels of education or training.

(There are numerous “side hustles” and other ways that you could try to make a few extra bucks if you find yourself in immediate need of cash. See HERE for ideas.)

(3) Reduce Expenses

For those who can see no instant way to bump up their incomes, this may be the only game in town.

Everything begins with a budget.

Start tracking every single penny that you earn and every single penny that you spend.

Your goal will be to get a handle on your cash-flow situation.

You’ll be dividing your spending into two general categories: necessities (or needs) and non-necessities (or wants/extras).

The idea will be twofold.

Number one, you want to reduce — if possible — spending on needs to bare-bones levels. These will be your mortgage, utilities, and groceries, or your “M.U.G.” expenses.

How do you cut these down?

On the one hand, some things are easier to do. Maybe you clip coupons or join a members-only store — such as Costco or Sam’s Club. Perhaps you shop at budget supermarkets. You might buy deli meat and make your own lunch, rather than eating out every day.

Utilities-wise, you might turn the air conditioner up a bit (to make it warmer) in the summer. You can wear fewer clothes while in the house. Similarly, you could turn the furnace down a bit (to make it a littler chillier) in the winter, and then just dress in more layers of clothing.

If feasible, you can look into adding insulation in the attic or even in the walls to further slash heating-and-cooling bills. If you have a little money to make the investment, you may look into solar paneling.

Cutting living or mortgage expenses can be multifaceted, depending on your situation. One thing might be refinancing and trying to secure a lower interest rate on your home loan. You may also look around for less expensive housing or rental options.

(4) Increase Income AND Cut Expenses

Of course, there’s always the composite strategy of doing both.

How Can You Get Started?

Maybe some of these random suggestions sparks something in your imagination and sets you down a better path.

But if you’re a bit unsure of where to begin, we can help.

Contact us today for a no-cost, no-obligation review of your financial situation. We are trained to help St.-Louis- (and surrounding) area families get themselves on track for their futures.

(636)447-1169

What Is ‘Affordable’?

There are at least two aspects to “affordability.”

Firstly, there is a measurable, financial aspect. This comes down to cashflow, expense-to-income ratios, and other money metrics. Since these numbers generally are what they, there is an objective quality to this aspect of the question. Because of this, your finances will be the focus of most conversations concerning what is or isn’t affordable for you or your family.

Secondly, there is a perspectival or subjective element. This may be what, from a psychological point of view, happens to “strike” a person as reasonable or not. There can be a wide variance, here. A lot will depend upon how much familiarity a person has with a particular industry. For instance, I know nothing about dairy cattle. So, when it comes to purchasing one, I wouldn’t know a good price from a bad price or a good value from a poor one.

Tracking Expenses

Before you can gauge affordability, you’ll want to get a handle on certain figures.

M.U.G. Expenses

Your basic, essential, non-negotiable expenses are frequently summarized under the acronym “M.U.G.,” standing for “Mortgage” payment, “Utility” costs, and “Grocery” expenses.

They’re “non-negotiable” in the sense that you need basic necessities such as food, shelter, and water to live. But there is a bit of negotiability in the following sense.

If you’re living above your means in somewhere like Compton Heights, Kirkwood, Ladue, Lake Saint Louis, Old Jamestown, or Wildwood, then you may need to rethink your living situation.

Sustainability is one key to keeping M.U.G. expenses in check.

When you have pared these costs down, think of the final numbers as your bedrock needs.

Discretionary Expenses

Beyond your basic living expenses, you’ll probably spend some money on non-necessary items. These may include costs for dining out, entertainment, and luxury items.

I won’t try to summarize everything, here. But commonly this will include attending Blues’ or Cards’ games, eating at the various restaurants in St. Louis, going to the movies, and so on.

These are going to be on your want list, as opposed to your needs list.

If budget cuts are necessary, these are the expenses that will – or should – get axed first.

Saying that, however, I am not being cavalier or even advising an ascetic lifestyle.

St. Louis has a lot of no-cost or low-cost activities. We have a world-renowned zoo. We have the art museum. Even the St. Louis Municipal Opera Theatre (the MUNY!) has free seats – if you arrive early enough.

Understanding Your Retirement Funding

But you also want to factor in your retirement funding.

Many people are struggling to put away a few dollars in their employer-sponsored plans. There can be any of a number of different situations.

But if you’re making $150,000 and contributing $25,000 a year to your 401(k), but you have no life insurance and your spouse is staying at home with your four kids, you might want to do a bit of reallocation of funds in order to protect your survivors in the tragic event of your untimely death.

Cash Value Vs. No Cash Value

Another thing to think about will be the question of whether or not you want insurance that accumulates cash value.

Many people have strong opinions, and I won’t dive deeply into this topic, here.

But, suffice it to say that when we’re thinking about premium dollars, it matters for our “affordability” calculation whether you’ll be paying for “pure” insurance (via a term policy) or whether your policy will have a savings component (for example, as whole-life insurance has).

I’m not advising one or the other. I’m just saying that it changes the mathematics.

Get a No-Cost, No-Obligation Review

We have experience dealing with St.-Louis-area families.

We can factor in all of the above-mentioned considerations – and others as well.

Call today for a detailed review of your situation.

(636)447-1169

Or use the contact form, HERE.

It’s an old adage, to be sure. But there’s a lot of truth in it.

I used to work at an electronics retailer. (The exact store will remain nameless.)

People would come in and inquire about a specific kind of product. PCs. Phones. Radios. Scanners. Televisions. Whatever.

I’d show them what we had.

Inevitably, someone would ask: “Don’t you have anything cheaper?”

And I would always reply the same way.

“Do you mean ‘cheap’ as in shoddy design, or low price?”

Give me a break! I was a teenager.

Sure! I was just trying to get the customer’s goat. (Guilty!)

The serious point, though, was that something can be “cheap” for any of a number of reasons.

Clearly, we want our expenses to be manageable. But we also want items that are serviceable.

It comes down to value. Sometimes, the thing that provides the greatest value, doesn’t have the smallest price tag.

Two Initial Choices: Temporary or Permanent

When it comes to life insurance, there are two immediate options: temporary insurance, called “term,” and permanent insurance, or “whole life.” (There is a kind of in-the-middle selection: universal life. But, I will not get into that, here.)

Term insurance provides what is sometimes called “pure” protection. This means that it doesn’t do anything else except offer a death benefit.

Permanent insurance, on the other hand, usually conjoins a death benefit with some sort of savings component, referred to as its “cash value.”

Now, it’s beyond the present scope for me to describe the intimate workings of cash value. Suffice it to say that a permanent product that offers both a living benefit (i.e., the cash accumulation) and a death benefit (the payout at the insured’s death) is going to be a greater expense than a temporary product that only offers the latter.

Which one is the better value will depend upon your budget, circumstances, goals, and overall financial picture.

As always, you have to be approved for life-insurance coverage. This approval process, called “underwriting,” determines your premium payment based on your health, driving record, financial risk, etc.

Call Today to Explore Your Options

(636)447-1169

Or use our Contact Form.

Then you need to send in an application.

Period.

Here’s the reality.

Either a company has multiple underwriting classifications, or it doesn’t.

If it doesn’t have numerous possible classes, then that means it probably assumes that everyone is unhealthy.

Think about it.

If you’re not going to assess people in terms of the risk that they pose, then is it wiser to assume that they’re healthy or that they’re not healthy?

A company that only has a single underwriting classification — or that does “simplified-issue” policies — is going to assume that most applicants are unhealthy to one degree or other.

On the other hand, a company that has numerous underwriting categories is going to try to gauge your particular risk-level much more carefully.

But, there is a corollary to this.

The more underwriting classifications exist, then more possible outcomes there are to your underwriting analysis.

Here’s the upshot.

If you want to get the best rate possible, you have to be willing to go through the entire underwriting process.

If you want to rush things, you’ll lose out.

So, take the time.

Unless you know that you have a terminal illness (in which case, you’ll want to examine your options in terms of guaranteed-issue insurance), you’ll be best served by answering questions and submitting to medical examinations / paramedicals.

It’s the most direct way for the insurance company to peg your actual risk level.

For more direction, please call for a no-cost, no-obligation review of your situation.

(636)447-1169

Income Replacement

Perhaps the most straightforward application is for income-replacement purposes. I have written about this is greater depth elsewhere. (See HERE.) But, let me just sketch this for interested readers.

To put the idea in its simplest form, income replacement is where you match a death benefit to some multiple of an income earner’s yearly salary or wages.

For example, consider Sally, who makes $150,000 a year at Boeing. She’s 30 years old, married, and has 2 kids. Let’s say that her youngest child is 2 years old.

Although she doesn’t have a definite retirement date in mind, she will qualify for full Social-Security benefits around age 67. That gives her 37 years to work.

Between now and age 67, her family expects her to bring in $5.5 million: $150,000/year X 37 years.

Or again, her youngest can be expected to be finished with a bachelor’s degree in about 20 years. (These are all just rough projections.) Between now and then, Sally will have earned $3 million: $150,000/year X 20 years.

Of course, she has some group, supplemental term insurance through Boeing. Suppose that she has 6X her income, or $900,000.

Even with her group term, Sally might be interested in increasing her insurance amount, in order to cover her income for longer. Whether she wants to cover her earning power until the emancipation of her children, or all the way out to her projected retirement date, or something in between, getting private term insurance on her life may be a valuable addition to her family’s portfolio.

Life-Insurance as a Retirement Supplement

Another potential concept of interest is the so-called life-insurance retirement plan, or LIRP. Under this sort of plan, some sort of cash-value life insurance can be used as a supplemental vehicle, once other forms of retirement savings – like employer-sponsored plans (such as 401(k)s and 403(b)s), Traditional Individual Retirement Accounts/Annuities (IRAs), and Roth IRAs – have been, or are being, adequately funded.

However, a few St. Louisans work for smaller companies, or otherwise don’t have access to some of the usual, retirement-funding vehicles. A life-insurance-based plan may be right for some of these people as well.

Who Might Be Interested?

There are many major corporations in the area. These concepts may apply regardless of whether you work at Ameren, Anhesuer-Busch (Inbev), BJC, Boeing, Burns and McDonnell, Centene, Emerson Electric, Enterprise, Express Scripts, GM, Jones Financial, Mallinckrodt, Mercy Medical, Monsanto, Peabody, SSM, a state or private school district, or somewhere else.

Workers at any of these businesses, and many others besides, may have at least some interest in exploring their options or protecting their earning power for their families.

We understand the benefit packages of St. Louis’s local businesses. We can help you think through the relevant issues and make decisions that are right for your family and situation.

Call today for a no-cost, no-obligation review.

(636)447-1169

(1) Employer Pensions

(2) Social Security

(3) Private Savings

However, because employer pensions are going the way of the dinosaur and the 8-track, and because Social Security is on ever shakier ground, private savings have taken on an increasingly important role in retirement-planning applications.

We have the expertise to help you navigate through some of these choppy and uncertain waters.

Our team is well familiar with local corporations — such as Ameren UE, Anheuser-Busch / Inbev, BJC, Boeing, Centene, Emerson Electric, Enterprise, Express Scripts, General Motors (GM), Graybar, Jones Financial / Edward Jones, Monsanto, Panera / St.-Louis Bread Co., Peabody — and, more to the point, their benefit plans.

When appropriate, we take a holistic approach. Let us assist you in planning for your retirement with 401(k) (or other, employer-sponsored plan) contributions (like those in 403(b)s, 457(b)s, etc.), Life-Insurance Retirement Plans (LIRPS, or “7702” plans), and in incorporating retirement annuities.

We appreciate and weigh the roles played by both conservative vehicles (such as certificates of deposit, or CDs, and CD-alternatives, such as cash-value life insurance) as well as less conservative vehicles (like market-connected vehicles such as index funds, mutual funds, and variable life-insurance policies).

Seldom is a one-size-fits-all approach the right way to go. No less is this true in retirement planning.

Everyone’s situation is different.

Your goals are unique.

Your values are your own.

Your assets and income must be carefully factored.

We do not pretend to be the end-all/be-all of retirement planning.

But we do subscribe to the old adage, “Measure twice; cut once.”

Do you have enough confidence in your retirement plans to get a second opinion?

Call today for a no-cost, no-obligation assessment and review.

(636)447-1169