COBRA Health Insurance Coverage

Is COBRA Health Insurance something that you should be considering? A friend's brother lost his job and decided to go without health insurance until he found another job with health benefits. The main reason was that it was too expensive, and he hadn't been to the doctor in about 2 years anyway. He figured he could go for some time without it and maybe he is right. But it could also end up being a very costly mistake. I have read horror stories of people who developed serious illnesses only to be denied certain coverages with their current insurance plans. So I can just imagine how difficult it would be to get new coverage with a pre-existing condition. To prevent any break in coverage, one should really consider transitional coverage known as COBRA.

COBRA gives workers and their families who lose their health benefits due to certain qualifying events the right to chose to continue group health benefits for a limited period of time, generally 18 months. Some of the events that could cause the loss of benefits and entitle you to COBRA coverage are voluntary or involuntary job loss (for reasons other than gross misconduct), reduction in work hours, death or divorce. You must have been enrolled in the employer's health plan at the time of the event that caused loss of benefits.

When you are no longer entitled to benefits, your employer is required to notify you of your right to elect COBRA coverage. They must also notify the plan administrator and you should receive notice from them informing you of your options. You must respond to them by a specified period of time, or you will lose your rights to COBRA benefits. You must be offered the same type of coverage that is available to eligible employees and generally the same coverage you had prior to the event that caused loss of health benefits.

You will most likely be required to pay the entire cost of the plan (up to 102%, 2% for administrative costs). This can be costly as you will now be paying the portion that your employer had paid for you. However, you are still paying group rates which in many cases is cheaper than buying an individual policy. There is always the possibility of unexpected illnesses, hospitalization or surgeries that would undoubtedly be more expensive than the premium you would pay for COBRA coverage. You should definitely shop for a policy that fits your particular situation, because it is possible that you would find something cheaper. But it's good to know that you have the Cobra option and can insure that there is no lapse in your coverage.

For more information regarding COBRA and some FAQ's visit www.dol.gov/dol/topic/health-plans/cobra.htm.

Is Santa Claus (the rally) Coming to Town?

The Santa Claus Rally which actually refers to the the week between Christmas and New Year's has broadened its definition in recent years. It now is referred to much more often in the weeks leading up to Christmas. Will we get the rally this year or has Santa come early?

In the past 8 years or so, November and December have been extremely bullish and about 65% of the time stocks advance the week following Christmas. There are several factors that contribute to the Santa Claus rally including year end tax considerations, the tendency of people to fund their IRAs and 401K's for the start of the new year, financial institutions looking to be fully invested for the new year, and the anticipated January effect which is the tendency of stocks to rise in January. However, the "January effect" has become so anticipated that in recent years it has not really materialized.

With the Dow Jones making new highs on an almost daily basis and the other indexes following behind, I can only wonder if a correction is not in order. Last week it was a bit concerning with good news coming out, strong futures in the morning and then a drop in the stock market. This is usually a sign of a pullback. I really don't expect a large pullback, since the market has also been shrugging off seemingly bad news, usually recovers from early drops and has consistently been closing off of the lows However, I am personally hoping to add to my positions at lower prices.

I guess we will have to wait and see if the market continues it's strong year end advance, or if Santa Claus (the rally) has come early this year.

Grocery Savings

I just recently discovered the website for the grocery game, www.grocerygame.com. I am ready to try it out. What it does is reveal rock bottom prices on hundreds of products each week and matches them up with manufacturer's coupons for best possible savings at local supermarkets. There is a 4-week trial for $1 and afterwards it goes to $10 for 1 store and $5 for each additional store. I've tried to do this myself for years, but I am ready to accept any help I can get. The savings seems outstanding, but I am curious as to whether it actually pays to use. There is another site, www.couponmom.com that I am going to check out also.
There seems to be a lot of savings opportunities out there and I am ready to save.

Teaching Kids About Saving Money

It is a good idea to teach kids about money at an early age. I've found that the whole concept of saving to them is overwhelming. So I believe that the earlier they learn the better. Nip those spending urges in the early years and everyone will be better off.
One of the first things that I attempted to teach my girls was the difference between a penny, nickel, dime etc... They were all very smart and learned a lot of things at an early age, their memories sometimes amazed me, but try to teach them the different coins and you would have thought it was trigonometry. They all seemed to have trouble with remembering what was what. My husband said it was because they were girls and would never grasp the concept of money or savings. One dirty look from me and he said he was just kidding...??? Anyway, we stuck with it and they eventually learned. I think the most important thing is to make it fun to learn and save. Here are some of the things that I've tried with my girls even before they were 5.

• Made flash cards with the coins attached. It was a good way to teach them to spell the words too. ( I think they learned how to spell the words before they remembered what each coin was). If they remembered the name of the coin, I would give them one for their bank. Which brings us to the next step, a piggy bank.
• The bank they use should be something fun. They've had all different kinds, from see-through, to electronic, to an actual "piggy" bank. One of their favorites is a simple plastic Clifford about 6 inches long where they put the money on top of his head and it rolls down his back and into his body. Whatever they choose, make it something that they will want to use. If they get bored with it and want a new one, make them save up for it.
• When they want to buy something, I let them bring their money to the store, pick out what they want and pay for it themselves at the counter. Sometimes it's a good idea to do this when it's not so busy, as they have all paid in coins for things upwards of 5 dollars. The clerks are not always so thrilled, but they are usually helpful and understanding.

Now that my two older girls are 8 and 10 they are of course asking for more high priced items that "everyone" has. Here are some of the things I have tried with them.

• They make a list of their "financial goals". Either how much they would like to save by a certain date, or items that they would like to buy. Then they begin to save with these items in mind. If they want a pair of shoes that cost $20 more than I would normally spend, then they need to save the $20 and I will chip in the rest. Knowing what they want and how much it costs will either cause them to save better, not spend their money just because they have it or they may realize that it's too much money and that they don't really need it because there is something that they want even more.
• Explain to them the concept of bank interest. They like the fact that if they put their money in the bank rather than keeping it at home, they will get more money from the bank. I know it's not much, but to them it's like getting something for nothing. When they receive money as a gift, I try to have them put part of it in their savings account. I don't force them to do this, but most of the time they are receptive to the idea knowing that they will earn even more.
• I've let them sit with me while paying bills so that they can see where our money goes every month. Then they realize that the money that comes in needs to go out so that they can live in their house and have lights and tv and heat or air conditioning, etc...
• Let them earn money at home by giving them extra chores, like raking leaves, helping with yard work, washing the car.

These are just some of the ways I have gotten my girls interested in saving. I've found the most important thing is to make it fun and interesting. I am always looking for new ways, so if anyone has any ideas, let me know.

Year-end tax tips

This time of year can be overwhelming with all the holiday preparations, but don't let that keep you from looking at some great year-end tax tips. Many need to be done before December 31, so it's time to start checking them out now. CNN Money.com has some great tips for year-end at http://money.cnn.com/2006/11/01/pf/taxes/yearend_tax_tips/index.htm.

I've done many of these that have saved me come the dreaded April 15th. My contribution to an IRA (you have until 4/15) or 401K (by year end), giving to charity (whether it be cash or goods), and selling winning or losing stocks have been several of my regular year end tactics. The above article mentions selling losing stock to offset capital gains, but don't forget that if you have a carryover loss from previous years you can take that opportunity to sell some winning stocks at a profit as long as your losses will offset them.

Early termination fees- To pay or not to pay

There has been a lot of uproar lately about early termination fees that the cell phone companies are charging. It's really nothing new. I remember about 4 years ago going through the frustration of dealing with a carrier regarding an early termination fee. We had the phone for over 3 years, and had changed our plan at some point, but were not told this was considered a "new" contract. Then when the service got too horrible to take anymore, and we had a phone that was falling apart, we tried to cancel. Cost=$200. I spent way too much of my time arguing with them. Then decided it was cheaper to stay on for several more months than to cancel. Nothing is more frustrating than being forced to pay for something that is of no use!

I've read a few articles lately claiming different ways to get out of paying the fee, several that I had heard before and even some that friends or family tried (most unsuccessfully). But I actually checked out the customer agreements for Verizon, Sprint, T-Mobile and Cingular. They all have a clause that states (in a round-a-bout way of course) that if plan costs change in a way that adversely affects you, you can cancel your plan with no termination fee. They sure don't openly advertise this. I know I was never aware of it. I've copied below the parts of each agreement that give you this information. Sorry they're so long. It's probably on purpose so you don't read them.

VERIZON

Our Rights To Make Changes Your service is subject to our business policies, practices, and procedures, which we can change without notice. UNLESS OTHERWISE PROHIBITED BY LAW, WE CAN ALSO CHANGE PRICES AND ANY OTHER CONDITIONS IN THIS AGREEMENT AT ANY TIME BY SENDING YOU WRITTEN NOTICE PRIOR TO THE BILLING PERIOD IN WHICH THE CHANGES WOULD GO INTO EFFECT. IF YOU CHOOSE TO USE YOUR SERVICE AFTER THAT POINT, YOU'RE ACCEPTING THE CHANGES. IF THE CHANGES HAVE A MATERIAL ADVERSE EFFECT ON YOU, HOWEVER, YOU CAN END THE AFFECTED SERVICE, WITHOUT ANY EARLY TERMINATION FEE, JUST BY CALLING US WITHIN 60 DAYS AFTER WE SEND NOTICE OF THE CHANGE.

SPRINT

We may change the Agreement at any time with notice. Any changes to the Agreement are effective when we publish them. If you use our Services or make any payment to us on or after the effective date of the changes, you accept the changes. If we change a material term of the Agreement and that change has a material adverse effect on you, you may terminate the Agreement without an Early Termination Fee by calling 1-888-567-5528 within 30 days after the changes go into effect. You understand and agree that taxes, Universal Service fees and other charges imposed by the government or based on government calculations may increase or decrease on a monthly basis, and that this paragraph does not apply to any increases in such taxes, Universal Service fees or other charges.

T-MOBILE

Changes to the Agreement or Charges. EXCEPT TO THE EXTENT PROHIBITED BY LAW, IF WE: (A) INCREASE THE CHARGES INCLUDED IN YOUR MONTHLY RECURRING ACCESS RATE PLAN, OR (B) MODIFY A MATERIAL TERM OF OUR AGREEMENT WITH YOU AND THE MODIFICATION WOULD BE MATERIALLY ADVERSE TO YOU, WE WILL NOTIFY YOU OF THE INCREASE OR MODIFICATION AND YOU CAN CANCEL THAT SERVICE WITHOUT PAYING A CANCELLATION FEE (WHICH IS YOUR ONLY REMEDY) BY FOLLOWING THE CANCELLATION INSTRUCTIONS IN THE NOTICE. IF YOU DO NOT CANCEL YOUR SERVICE BY FOLLOWING THOSE INSTRUCTIONS, OR YOU OTHERWISE ACCEPT THE CHANGE, THEN YOU AGREE TO THE INCREASE OR MODIFICATION, EVEN IF YOU PAID FOR SERVICE IN ADVANCE. IF THE NOTICE DOES NOT SAY HOW LONG YOU HAVE TO CANCEL, THEN IT IS WITHIN 14 DAYS AFTER THE DATE OF THE NOTICE, UNLESS A LONGER PERIOD IS REQUIRED BY LAW. EXCEPT TO THE EXTENT PROHIBITED BY LAW, CHARGES FOR PRODUCTS, SERVICES, OPTIONAL SERVICES, OR ANY OTHER CHARGES THAT ARE NOT INCLUDED IN YOUR MONTHLY RECURRING ACCESS RATE PLAN (SUCH AS DIRECTORY ASSISTANCE, ROAMING, DOWNLOADS, AND THIRD-PARTY CONTENT) ARE SUBJECT TO CHANGE AT ANY TIME WITHOUT NOTICE, AND IF YOU CONTINUE TO USE THOSE SERVICES, OR YOU OTHERWISE AGREE TO THE CHANGES, THEN YOU AGREE TO THE NEW CHARGES. VISIT OUR WEB SITE, RETAIL LOCATIONS, OR CALL CUSTOMER CARE FOR CURRENT CHARGES.

CINGULAR

Provide customers the right to terminate service for changes to contract terms. Carriers will not modify the material terms of their subscribers' contracts in a manner that is materially adverse to subscribers without providing a reasonable advance notice of a proposed modification and allowing subscribers a time period of not less than 14 days to cancel their contracts with no early termination fee.

The Right Education Savings Plan

I recently had a friend ask what I thought was the best education savings plan to invest in for her children. It's not an easy question to answer. I used to feel overwhelmed at the prospect of investing for my children. There seemed to be too many options, each with their pros and cons. I had asked several people what the best investment vehicle was and there was no universal answer. The correct answer is that there is no correct answer. Each person needs to decide what is most important to them (besides making the most money) when it comes to investing for their child's future. Is it tax implications, investment limits, who controls the investments? Below are some of the features of the most popular vehicles; 529 plans, Coverdell Education Savings Accounts, and UGMA/UTMA. Hopefully this can help make your decision a little easier.

529 Plans

• Non-deductible contributions. Earnings withdrawals are free from federal tax when used for qualified higher education expenses. State tax implications vary by state and plan.
• Qualified expenses include tuition, fees, books, supplies, equipment and room and board.
• Maximum investment varies by state/plan. Many in excess of $250,000 per beneficiary
• Ability to change beneficiary to another member of beneficiary's family.
• No time/age restrictions unless imposed by the program.
• No income restrictions
• For federal financial aid purposes, counted as asset of parent or other account owner, not as a student asset
• Investments controlled by state appointed fund manager and developed by the plan.
• If used for non-qualifying expenses, withdrawn earnings are subject to federal tax and 10% penalty.

Coverdell Education Savings Plan

• Non-deductible contributions. Withdrawals are free from federal tax when used for qualified higher education expenses. Withdrawals can also be used for K-12 educational expenses.
• Maximum investment is $2,000 per beneficiary per year combined from all sources.
• Qualified expenses include tuition, fees, books, supplies, equipment, room and board, plus additional K-12 expenses.
• Ability to change beneficiary to another member of beneficiary's family.
• Contributions until age 18; use of account by age 30.
• Ability to contribute phases out for incomes between $190,000 and $220,000 (joint filers).
• For financial aid purposes, counted as asset of parent or other account owner, not as a student asset.
• Broad range of investments options that you have control over.
• If used for non-qualifying expenses, withdrawn earnings are subject to federal tax and 10% penalty.

UGMA/UTMA

• Earnings and gains taxed to minor; first $850 of unearned income is tax exempt, next $850 at child’s rate, over $1,700 for minors below age 18 taxed at parent’s rate.
• No limit on contribution amounts.
• No restrictions, does not have to be used for educational expenses.
• Not able to change beneficiary, represents an irrevocable gift to the child.
• Custodianship ends when minor reaches age of maturity (varies by state, usually 18 or 21).
• No income restrictions
• Considered asset of the child.
• Broad range of investment options that you have control over.
• Funds must be used for benefit of the child.