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Monday, September 23, 2013

Understanding How to Efficiently Leverage Your High Deductible Health Insurance Plan

In the last few years many companies, including ours, have moved to a High Deductible Health Insurance Plan. The one that is most commonly used has the acronym HSA, or Health Savings Account.  Unfortunately, I have had extensive use of this account over the last few years; we have had a baby, my wife had a minor procedure, and I had reconstructive knee surgery.

A question I pose to you:  Has your employer explained how to efficiently use your HSA?

What I mean by efficiently use is: Have they discussed the world of negotiation with your providers? The caveat to this is that you need to regularly fund this account so there is money to make payments, or you need to have money saved so you can make a lump sum contribution to the account if necessary.  

Typically you go to the doctor, hospital, or provider and present your insurance card.  You are then asked if you have a co-pay, I always say “I have an HSA, please send it through my insurance.”  Your insurance provider then sends it through their system and sends you a summary of what they covered and what their negotiated rate for the service is.  Next comes the fun part, bills from various providers that you must pay.  Did you know that you can negotiate a lower payment on those bills with each provider after it has gone through insurance? Let me give a few examples of how this has worked:

Example one:  This happened a few years ago:  I received a statement for the birth of my son and it was a pretty large bill. The statement said, “Please call us and ask about our payment options.”  I called and asked what those payment options were. The answer was 0% for 12 or 24 months if I made monthly payments, or 10% off now if I paid in this billing cycle.  Sold, 10% now!

Example two:  A couple of years ago I received a bill from the same provider as above and called to ask what my options were.  Guess what?  The new payment option was 20% off if paid now!!

Example three:  I just had a client call last week and I discussed this HSA payment info.  She said, “I will try and call them and discuss my payment options.”  I received an email that night with a big smiley face that our conversation saved her over $450!

Understanding your benefits and using them efficiently can greatly benefit you financially.

Monday, September 9, 2013

Finding the Right Financial Advisor

I was reading the Grand Rapids Press a few weeks ago and came across a great article with tips on how to find the right financial advisor.  It came from the Wall Street Journal from July 27, 2013.  Finding an advisor is not an easy process, but should be a rewarding one.  The bottom line is to find an advisor that that is trustworthy, has a proven track record and is enjoyable to work with.  It should not be a chore to meet for an annual financial checkup.  Put together a list of questions and be prepared.  There are many great financial advisors out there, the trick is to find the right one for you.

Tuesday, September 3, 2013

Don't Ignore These Risks

Generally, when people talk about the risk in their investments, they are talking about the likelihood that the money that they have will go down in value. This represents a combination of business risk and market risk. A common mistake is to only consider these risks and ignore other types of risks that can adversely affect our savings.

Can you imagine if you got a monthly statement showing the fluctuating market value of your home? What if you could log in and see the market value every day? I suspect that you would find that there are wide fluctuations. In fact, market value is zero on days in which you do not have a ready buyer. If for some reason, you needed to sell your home or other real estate quickly, you may be forced to accept a lower price. This kind of risk is called ‘’liquidity risk’’. Some assets that are not easily sold or do not have ready markets contain higher liquidity risk.

The most commonly overlooked risk in my observation is inflationary risk. These are investments that lose money slowly, often, without us noticing. “I bought this fixed annuity in 1985 and it never lost money, now it’s worth double what I put into it’’. That’s great. Unfortunately, it lost money, nonetheless. That annuity fell victim to ‘’inflationary risk’’. The overall return was not adequate to keep up with the purchasing power. When we use short term investments to meet our long term goals, we take on a high level of inflationary risk.

When choosing savings and investments, we must understand the different kinds of risks. If our goals are short term such as saving for a new car or building up our cash reserve, we need to minimize market risk and liquidity risk. In this case, we are not worried as much about inflationary risk. Inflationary risk becomes the biggest problem as our goals become more long term. Understanding how to achieve the right balance is the key