To many folks, pets are an important member of their family. As such, they would do anything for them.
But when the family pet gets sick with a life-threatening illness, you could be faced with expensive veterinary care that you haven’t quite budgeted for and be put in a tight financial spot.
Take for example some real-life costs of typical surgical procedures: gastric dilation volvulus (bloat), $3,525; foreign-body ingestion, $2,964; cancer, $5,351; hit by a car with a fractured pelvis, $3,717. Here is a link to the source of the information with other examples.
It’s situations like these that pet insurance can be as valuable as people health insurance.
does it make sense to buy?
Whether you choose to purchase insurance or self-insure, you’ll need to weigh what you can afford over your pet’s expected life span.
For example, as your pet ages, the more you’ll pay to insure them and the less the insurance company will likely cover. At some point, it makes sense drop the insurance and purely pay out of pocket.
You can choose to self-insure (paying for medical care with your own accumulated funds) for the entire lifetime of your pet. If you’re going to self-insure, it is smart to set up a designated account exclusively for your pet’s care. That way the funds aren’t comingled with other emergency reserves and used for another purpose.
Having the foundation in place to care for your pet — without going into a financial strait — will avoid putting you in the situation of having to decide to put them to sleep because of money.
Before you buy
Okay, you’ve made the decision to purchase the insurance. There are few things you need to do before handing any money over to the insurance company.
Read the policy very carefully. As with anything, you need to look at the terms of the coverage. Some companies apply the deductible per incident, others per year. Make sure you know what you are buying.
Understand co-pays, deductibles, and caps. Pet insurance works differently than human health insurance. Know how much you’ll be responsible for paying and how you’ll be reimbursed by the insurance company.
Know what is excluded. Generally, you won’t be reimbursed for anything preventable and many times there are breed-specific exclusions.
Pet insurance is more about peace of mind than anything. Having the coverage may give you the freedom to make medical decisions for you pets based on their quality of life, and not because of finances.
Today marks the 14th day of yet another federal government shutdown.
The negotiations for a more “permanent” resolution have become entangled over the funding of the US-Mexican border wall.
The buzzword back in 2017 was “DACA” the Deferred Action for Childhood Arrivals immigration policy and the time before that, in 2013, was “debt ceiling” and “affordable care act”, as politicians in both parties couldn’t come to an agreement to keep the government operating.
It seems not much has changed.
While a shutdown does have an effect on the economy and many federal government employees (about 800,000), most of the essential operations will continue. Which means those of us who are not employed by the federal government should only be slightly affected by it, at least for the time being.
Here are some of the services that I think have a direct impact on all of us and how the shutdown will affect them:
Social Security
Most of the Social Security Administration’s staff are exempt from the furloughs and Social Security checks will continue to go out as planned.
Postal Service
The Postal Service operates off its own revenue stream, so post offices will stay open and delivery will be unaffected.
Internal Revenue Service
While the IRS has not released it’s plan for the government shutdown ahead of time like it has done in the past, I suspect refunds will be delayed if the shutdown is not resolved soon.
I don’t have any financial knowledge to drop on you today. But I do want to take a moment to say that I appreciate you for taking the time to read my articles and supporting my blog!
You are the reason I continue to put my ideas on this screen and it means the world to me to know that you find the information I share valuable enough to keep coming back!
I’m excited for what the future holds and having you be part of this journey!
Last night (as I sat in a turkey-induced coma) I watched in amusement as family members were gearing up for their annual Black Friday outing. Newspaper ads were strewn across the dinner table while they chatted about the most strategic routes to the best deals and how much they budgeted to spend at each location.
Their whole process reminded me of an article I read a few years ago that recommended a family spend 1.5% of their gross annual income during the holiday season for gifts.
That number kept running through my mind as they said their goodbyes and headed out to spend their hard earned money.
What Should You Be Spending?
It is easy to get “wrapped up” in all the hype about what you should be buying, or how much you should be spending.
Our society is obsessed with putting a number to happiness. If you don’t achieve that number, you feel like a complete failure; no wonder why so many of us have the winter time blues.
It is unrealistic to generalize everyone’s situation, and, to suggest that spending 1.5% of your annual income is the “norm”.
For instance, a family might have an annual household income of $250,000, but have horrible cash management skills and are drowning in debt.
Is it fair to say they should spend $3,750 this holiday season because that is what is expected? I don’t think it is.
I believe there are ways for families to still have fulfilling holidays while keeping on a budget, but not falling to social pressures.
Keep On A Budget
The keyword in knowing what the right amount for you to spend is budget. If you don’t know how you are spending your money, you won’t be able to identify problem areas that are holding you back from achieving your goals.
It usually takes six months to a year of continually tracking cash flow in order to get a good idea of where your money is going. Once you have established a budget that allows you to fulfill your most basic needs and goals, you can start to branch off and save for the things you enjoy; vacation, hobbies, holiday spending, etc.
Many financial institutions offer savings accounts that are aimed at specific goals. These are great ways to keep yourself on track for holiday budgeting. As a bonus, they usually have certain periods that you can withdrawal money, which will keep you from being tempted to dip into it.
Other Holiday Spending Ideas
If you don’t have a budget set up yet, or you are struggling to stay on budget, here are some recommendations that can help you keep your holiday costs low, but still enjoyable:
Invite friends and family over for dinner. You can usually provide a meal for 6 people for under $75. You are still providing your loved ones with something special, but keeping your costs to a minimum.
Take the family on a light tour around your town. Looking at the holiday lights that people hang each year is free! You get to spend quality time with your family and create lasting memories. Make the trip even more special by making some tins of hot chocolate.
Host a white elephant gift party. Everyone bring a gift under $10 and exchanges it with someone else. There are fun rules you can find online to make the exchange even more fun. You may even suggest a pitch-in so everyone gets fed, but the cost is split between multiple people.
Consider making charitable gifts in honor of someone. The money is going to a good cause.
These are just a few budget-friendly ways you can take part in the holiday spirit.
What it really boils down to is that creating memories and sharing time with loved ones is more important than any material gift.
Don’t get sucked up into what other people are doing and focus on what makes you happy.
As a financial advisor, I help clients navigate rolling over old 401(k)s to IRAs all the time. But what about people who don’t have a financial expert to rely on? They’ll most likely look to the internet for advice.
I noticed something recently though. The articles and blogs online only give guidance on the first step of a rollover, which is how to initiate one.
I couldn’t find an article that explained what happens after the rollover takes place, which is when some of the most important work actually begins.
That’s because rolling over a retirement plan to another retirement plan is considered a tax-free event. However, if you don’t report the rollover properly, you could be surprised with a tax deficiency letter from the IRS and possibly many hours spent resolving the issue.
Fear not! This is your complete rollover guide — from start to finish — so you’ll never miss a step in the process.
Before Starting a Rollover
Before actually beginning the rollover process, you’ll need to decide where you want your money to go.
If you have an old employer retirement plan — like a 401(k), 403(b), etc. — there aren’t very many reasons you’d want to leave it there.
Having multiple accounts at different custodians (the financial institution that holds your money) makes it really difficult to keep track of your finances. By simply rolling over an old retirement plan to another one you will greatly simplify your account structure.
Rolling over old employer retirement plans into an IRA can significantly reduce the amount of outstanding accounts.
Does your new employer retirement plan accept rollovers? If so, are you comfortable with putting your money there? If you already have an Individual Retirement Account (IRA), would you rather put it there?
Here is a nifty guidethe IRS provides that can help you choose which type of retirement plan you can roll in to.
Rollover Initiated
Once you’ve decided where the money will be going, you’re going to begin the actual rollover process.
There are a few ways I usually see rollovers initiated:
With a rollover form that the old custodian will give you
With a phone call to the old custodian
With transfer paperwork from your new custodian
It’s at this point that your first major decision takes place because you’ll have two ways the money can be delivered.
Option 1. Have the money sent directly to your new custodian. This is the simplest type of rollover since the money goes from one account to the other, with no involvement or responsibility on your part. This is known as a direct rollover, or trustee-to-trustee transfer.
Option 2. Have the money sent to you and then you forward that money to the new custodian. This is known as an indirect rollover.
With an indirect rollover, the day you take possession of the money you have 60 days to turn around and put that money into another retirement account. Even if you’re one day late, the entire distribution will become subject to income taxes and the 10% early withdrawal penalty if you’re under the age of 59 1/2.
Outside of some advanced planning strategies, I would generally avoid indirect rollover at all costs because they can be difficult to manage.
After the Rollover Occurs
Okay, the money is in your retirement account but you’re not done yet!
Even though you aren’t required to pay tax on this type of activity, you still must report it to the Internal Revenue Service.
At the end of the year — or early the following year — that your rollover took place, you will receive a Form 1099-R from the custodian who sent the money. The IRS will also be receiving one. That’s because your rollover is reported as a distribution, even when it’s rolled into another eligible retirement account.
It’s up to you to properly report the rollover on your tax return to avoid paying taxes. To do this, you’ll need to write in the amount shown on the 1099-R on line 4a and a zero on the taxable amount on line 4b. Write “rollover” or “R/O” in the blank space beside it. This will explain to the IRS why the distribution amount shown on line 4a is more than the taxable amount shown on line 4b.
This is not tax advice. This is my understanding of how to report a rollover based on personal experience.
And thats it! After your taxes are filed and the rollover has been reported, you are finally done!
Incorrect Reporting
Keep in mind that when a rollover isn’t reported properly, you’ll receive Notice CP2000 from the IRS asking for the taxes you owe them. I know because it’s happened to me!
If the rollover went into your IRA, you’ll receive Form 5498 from your custodian that can be used to substantiate your case. Make sure you keep these in your tax file.
If the money is sent to an employer retirement plan (401k, 403b, etc.) you won’t receive Form 5498 and it will require a little more work on your end to show the IRS that it was, in fact, a rollover.
