A better way to calculate the value of your time

It's both fascinating and useful to calculate the value of your time. Financial freedom gives you options and flexibility. But without time, that means nothing. Time is a precious resource that we should spend wisely.

Knowing the value of your time is helpful for a variety of reasons:

  • If you're a freelancer, it can help you decide on gigs.

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More about...Career, Economics, Frugality, Planning, Side Hustles

Bad advice about having a baby I’m glad I followed

Last week I was out walking with a friend when she admitted she was scared she would never have kids.

"We'll never be able to afford them," she said as we made our way around the block and up the next street. She and her husband are about our age (and not getting any younger), and I could tell she was worried.

"Oh, I'm sure you'll figure it out," I said as I tried desperately to change the subject. That was terrible advice and I knew it, but it was the same advice someone had given me several years before. (And probably for the same reasons.)

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More about...Planning, Economics, Insurance

HDHP with HSA: Friend or foe?

This article was written by Joanna Lahey, an associate economics professor at the George H. W. Bush School of Government and Public Service and a faculty research fellow at the National Bureau of Economic Research. The opinions expressed in this post do not necessarily reflect those of the aforementioned institutions. This is the final article in her series on health insurance. Here are the first, second and third articles.

Remember way back when in my first post when we talked about what the "ideal" health insurance would look like given human beings' unfortunate tendency to moral hazard? Basically, the idea was that health insurance would not be complete: There would be strong cost-sharing early on, but it would protect people from a catastrophic loss of money. (Note: This is "ideal" only from a certain theoretical efficiency standpoint -- there are many ways in which it is far from ideal.)

HDHP

High Deductible Health Plans (HDHPs) follow that basic model. The idea is that the client is responsible for all health care costs up to a certain high deductible, at which point the insurance kicks in, either with a coinsurance amount or paying 100 percent, depending on the plan. Frequently preventive care is provided for free prior to meeting the deductible (and under the provisions of the Affordable Care Act, we will be seeing more free preventive care). The size of the deductible is what makes it a "High Deductible" plan. In 2013, the minimum deductible for a HDHP is $1,250 for a single participant plan and $2,500 for a family plan. There's also an out-of-pocket maximum requirement for in-network providers, $6,250 for a single participant and $12,500 for a family. So a single plan at the legal limits would force you to pay $1,250 of your medical expenses upfront, and then a percentage of any remaining expenses until you hit the $6,250 out-of-pocket limit, at which point they pay the rest. Each year these numbers reset and you have a new deductible to meet and a new out-of-pocket limit.

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More about...Economics, Insurance

Health insurance options for the self-employed

This article was written by Joanna Lahey, an associate professor of economics at the George H.W. Bush School of Government and Public Service at Texas A&M University and the National Bureau of Economic Research (NBER). The opinions expressed in this post do not necessarily reflect those of the aforementioned institutions. This is the third of four articles on health insurance. The final part will be published next Saturday. Here are the first and second articles in the series.

I got married relatively young, at age 22. There was a gap between my marriage which kicked me off my parents' insurance and getting put on graduate school insurance. My father-in-law gave us short-term gap private insurance as a wedding present. It was expensive from my perspective (I was looking at an annual stipend of under $20K), but for private health insurance it was cheap.

Private Health Insurance Options

Private health insurance is one method that people use to get coverage when they're self-employed or unemployed. Because the private health insurance market is broken, it can be prohibitively expensive, if available at all. Private coverage can be affordable if you are young, healthy, single (or male) and only need it temporarily. But if you don't fall into all of those categories, it can be difficult and expensive. Fortunately, under the Affordable Care Act (ACA), private insurance can no longer kick you off if you get sick after paying for private coverage. Children with pre-existing conditions cannot be denied coverage. In 2014, insurance companies will no longer be able to deny adults coverage based on pre-existing conditions. Also in 2014, states should have their Affordable Insurance Exchanges set up, allowing individuals and small businesses to better shop for health insurance plans.

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More about...Insurance, Economics

Insurance: Share the risk

This article was written by Joanna Lahey, an associate professor of economics at the George H.W. Bush School of Government and Public Service at Texas A&M University and the National Bureau of Economic Research (NBER).

Ellen's note: Joanna has written four articles about health insurance. This is the first, and every Saturday for the next month, we'll be publishing one. Given the readers' concern over the cost of health insurance as well as the ability to get insurance, we think her articles will be a great addition to GRS.

What is Insurance?

We save for retirement in order to smooth our consumption over time. Money saved now when we have income allows us to eat more than cat food when we're retired and not bringing in as much.

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More about...Insurance, Economics, Health & Fitness

A penny saved is a penny spurned? What to do with pockets full of change

I regularly empty the change from my wallet. Pennies, nickels and dimes go into a pink piggy bank. Quarters go into “Mr. Nest Egg,” a bank shaped like Humpty Dumpty.

The quarters are for when I finally get around to washing my jeans. The rest of the change gets wrapped every so often and deposited into my “Home” account, where I'm saving for a down payment.

I'm one of the lucky ones: My bank accepts rolled coins. Not every financial institution accepts large quantities of coins — and some of the ones that do will charge a fee to count them. (Ever notice that they don't charge you to count the ones, fives, tens and twenties you bring in for deposit?) In this economy, you may find yourself prospecting under couch cushions for bus fare or a quart of milk. And since squirreling away spare change is a relatively painless way to build an emergency fund, it's a shame that some banks and credit unions discourage the practice.

The time value of money (or why 25 years of cable TV doesn’t cost as much as you think)

Just after Christmas, Carl Hendley of The Motley Fool wrote about his cable bill and how much lost investment income that money represented. As an economist, I was intrigued by the notion, and couldn't help but run the numbers. (We economists are strange like that.)

Hendley's calculations assume that the average person cares only about nominal, time-insensitive returns. That is, that a dollar today is worth a dollar tomorrow. But we economists know (from all of our fancy-pants research) that, generally speaking, that's not how people make decisions. Instead, when most folks make personal finance decisions, they take into account the time value of money.

The Time Value of Money

"The time value of money" is a complex term for a simple concept: Any given amount of money is worth more today than the same amount in the future. Assuming a 5% interest rate, for example, $100 today is worth $105 a year from now. (Or, working backward with the same assumed interest rate, $100 in a year is worth $95.24 today. And what, they're not the same? Nope!)

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More about...Economics

The tiger mother and you: Are we preparing our kids for a better financial future?

Battle Hymn of the Tiger MotherThose of you who are parents — and those of you who came from them — may have already read the Wall Street Journal article by Amy Chua (which is an excerpt from her new book, Battle Hymn of the Tiger Mother). If you haven't read it, this excerpt will give you an idea:

A lot of people wonder how Chinese parents raise such stereotypically successful kids. They wonder what these parents do to produce so many math whizzes and music prodigies, what it's like inside the family, and whether they could do it too. Well, I can tell them, because I've done it. Here are some things my daughters, Sophia and Louisa, were never allowed to do:

  • attend a sleepover
  • have a playdate
  • be in a school play
  • complain about not being in a school play
  • watch TV or play computer games
  • choose their own extracurricular activities
  • get any grade less than an A
  • not be the No. 1 student in every subject except gym and drama
  • play any instrument other than the piano or violin
  • not play the piano or violin.

As shown in this Today Show interview with Chua — a Yale law professors and the daughter of Chinese immigrants — when her daughter gave her a plain handmade birthday card, Chua handed it back and said, "I reject this."

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More about...Economics, Books

When to walk away from a bad mortgage

Since the housing bubble burst, many Americans have found their finances underwater. They're paying on homes that are worth much less than the mortgages against them. More than a few have chosen to walk away from these debts.

Called a "walkaway" or a "strategic default", deliberately defaulting on your mortgage is becoming more common as the real-estate market continues to struggle. Some experts believe that as many as 20% of homes currently in foreclosure are the result of walkaways: people who had the means to pay their mortgage but chose not to when their life circumstances changed and they found their homes unsellable.

Businesses walk away from bad investments and debts like this all the time, but for an individual to do it takes guts. There's a huge stigma associated with walking out on your mortgage. Americans feel that there's something morally wrong with not paying your debts, even when those debts are astronomical or unfair.

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More about...Debt, Economics, Home & Garden

Want to make more money? Go back to school!

Lately, I've been more vocal about the importance of looking for ways to boost your income. Cutting costs is awesome — don't stop — but if you really want to supercharge your debt reduction or your saving, you have to look for ways to earn more money.

"That's great," some commenters have said, "but how do we earn more money." That's a fair question, though it's much tougher to answer than, "How do I spend less?" For the most part, we all spend money on the same things. But we all earn money in different ways. We each have different work ethics, abilities, and styles. It's much more difficult to generalize about ways to earn more money.

All the same, it's a topic we've explored many times in the past here at Get Rich Slowly, in articles like:

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More about...Economics, Education