As Election Day draws (mercifully) near, that old question “Are you better off than you were four years ago?” comes up again and again. I’m not going to talk politics. However, I think the better question at any time (and one that is worth asking a few times a year) might be “What is your most pressing financial issue?”
Facing foreclosure? Deep in credit card debt? Shopping for health insurance? Lost your job? Can’t make the student loan payments? Haven’t started saving for retirement? Can’t even save enough for an emergency fund? These are some of the issues that many people are dealing with.
For the past few months, my most pressing issue has been retirement. I have money saved, and I’m feeling pretty comfortable about my future. But one big retirement issue still needs to be resolved: Should I buy long-term care insurance? I’ve talked to several insurance agents and the options for long-term care are mind-boggling. How much money per day should I expect to need? How long should my elimination period be? How much inflation should I anticipate? Should I skip LTC and the high annual premiums and just put that amount away in a safe investment, like bonds, or invest in dividend-paying stocks? Complicating the choice is a health issue I had nearly 20 years ago, which will probably knock me out of the best pricing – even though the problem was fixed and I’m fine! I haven’t decided what to do yet, but I’ll update you once I’ve sorted it out.
Health insurance for the unemployed
A few weeks ago, a close friend was laid off from his editing job after eight years. He’s busy updating his resume and also looking for health care options, since COBRA is so expensive. In August, MoneyRates.com and MSN.com did a joint poll asking what workers want: free health care, a 10 percent raise, more vacation time, or the ability to retire early. Of the more than 10,000 respondents, 44 percent said free health care.
Tying health care to a job has always seemed crazy to me. It’s a huge expense for employers. A benefits consultant once told me that an employer should plan to add 30 percent over the salary of an employee to cover benefits. When I lived in Australia, which has universal health care, I met many people working in jobs they were passionate about, even though the positions didn’t pay much. Without having to worry about health coverage, they could make decisions about their lives based on what they wanted to do. Australians are world travelers, and when they head to Asia or Europe or the U.S. for a few months, they can pay the government a fee to extend their health coverage while they’re abroad.
Debt hinders choices
If you’re facing multiple financial pressures, it’s overwhelming. Where do you start? I’d start by paying down credit card debt. The APR on most credit cards is probably the highest interest consumers are paying. The average credit card interest rate is about 16 percent. The average auto loan is around 4.5 percent and mortgage rates are at historically low levels at 3 percent. So paying off the credit cards and keeping them paid off is the first step.
If you’ve lost your job and don’t have an emergency fund, paying down your debt will take a backseat to finding a job. I’ve been without work when a magazine has failed (this has happened a few times!), and there is nothing more gut-wrenching than not having a paycheck – or something to do each day. (The loneliness of being unemployed cannot be underestimated, either.) Fortunately, I was always able to find freelance editing or writing work to tide me over until I found a full-time job. My recently unemployed friend is a terrific guitar player, and he’s already said he’s going to teach guitar while he’s job-hunting. Other unemployed friends are learning new skills to expand their opportunities. These days, job-seekers have to be creative, dogged, network like crazy, and perhaps get lucky. Finding a side job is crucial, although that may be just as difficult as finding the full-time job today.
In south Florida, as in other states hit hard by the housing collapse, many people are out of work or underemployed but can’t move for a job because they can’t sell their home. So they’re stuck in a tight job market, paying for a house that may not be worth what they owe. Man, there are a lot of financial problems.
So I’m asking the readers: What is your most pressing financial problem and what are you doing to solve it? What problems have you overcome and what advice can you offer others in a similar situation?
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