Published: by Crystal Paine on December 9, 2014 | This post may contain affiliate links. Read my disclosure policy here.
Guest post from Holly of The Work at Home Woman
It’s no secret that Americans are foodies! In fact, according to the Bureau of Labor Statistics, Americans spent an average of $6,602 a year on groceries and eating out alone (source).
If you’ve been looking to launch your own home-based business and you love to create culinary delights here are 5 different food careers to consider:
1. Teach Cooking Classes
Do people always rave about your cooking? Then perhaps you should launch a home-based cooking class business. Gather individuals or small groups of people in your home and teach them how to cook or bake like a pro.
Don’t want to mess with a business plan and all the logistics of setting up a business? Consider joining Healthy Hands Cooking. It’s a home-based franchise that certifies instructors to teach kids how to cook healthy meals and snacks. Start-up fees are minimal and include training, certification, marketing tools, business materials, as well as ongoing support.
2. Create Gourmet Goodies
Are you a whiz in the kitchen? Then consider starting your own gourmet food business. Foodies not only love to consume delicious goodies, they also make make great gifts! From fancy gourmet sauces and treats, to healthy and specialty snack items.
Set up your own website or use an e-commerce platform like Foodoro and you’re ready to start selling your custom treats.
3. Become a Direct Sales Consultant
Would you love to own your own cafe or bistro but don’t have the funds to invest in a brick and mortar storefront? No problem. The direct sales industry has made it easier than ever to have your very own home-based business within the food industry.
Companies like the Traveling Vineyard, Tastefully Simple, and Dove Chocolate Discoveries offer home-based business opportunities selling products like wine, gourmet mixes, spices, desserts, chocolates, and gift sets.
As a direct sales consultant you will be paid a commission on each product that you sell. Most direct sales companies will also pay you a small bonus commission from consultants who you refer into the program.
4. Start a Food Blog
Do you enjoy writing? Do you love to test out new recipes? Then join the ranks of Julie Powell, who set out to cook all the recipes in Julia Child’s cookbook, Mastering the Art of French Cooking.
Not only did Julie’s blog quickly generate a huge following, but she went on to the write the bestselling book Julie & Julia, which was later turned into a movie. While you can make money through book sales, bloggers can also make money through direct ad sales, affiliate marketing, as well as working with brands.
Tip: Read more on how to make money blogging here.
5. Food Stylist
Do you have an eye for detail? Then working as a food stylist may be your calling. Food Stylists prep and prepare food items for displays, cookbooks, photo shoots, advertisements, and menus. Becoming a Food Stylist requires knowledge of the culinary industry as well as additional training or apprenticeship.
Denise Vivaldo, a seasoned food professional with over 27 years of experience has created workshops and classes for those who are interested in this field. You can also check out her book on Amazon, The Food Stylist’s Handbook.
For more information on ways to make money, visit The Work at Home Woman, where you can read about topics like how to make money completing short tasks, selling your used stuff online, and businesses you can start with no money.
A payable on death account or POD account allows you to transfer money to someone else when you pass away without requiring those assets to go through probate. The individual or entity who collects those assets is called a POD beneficiary.
What does POD mean in banking? Broadly speaking, there are a number of deposit accounts that can be deemed payable on death, including checking and savings accounts.
If you’re considering establishing one of these accounts, it’s important to understand how POD accounts work, and if you are a beneficiary, it’s also helpful to know when and how you’re entitled to withdraw money from a payable on death bank account. Read on to learn:
• What does POD mean in banking?
• What are POD bank account rules?
• What are the pros and cons of POD accounts?
Payable on Death Accounts Explained
A payable on death account pays out assets to a beneficiary when the account owner passes away. You may also hear POD accounts referred to by other names, including:
• Totten trust
• Tentative trust
• In trust for account
• Revocable bank account trust
• Informal trust
When you create a payable on death account you can decide how many beneficiaries to add and who to name. Examples of POD beneficiaries can include:
• Adult children
• Siblings
• A non-profit
• A trust
Worth noting: If you co-own the account with someone else, they cannot be named as a POD beneficiary.
Payable on Death Rules
Payable on death accounts have certain rules that set them apart from other accounts. The most significant rule concerns when beneficiaries can access the money in the account. Here are some details to know:
• If you open a POD bank account, you have full control over the money in the account during your lifetime. Even if you name 10 beneficiaries to the account, those beneficiaries cannot lay claim to any of the funds in it until you’ve passed away.
• In terms of how the money in a payable on death bank account is divided, each beneficiary receives an equal share. So if you have $100,000 in a savings account when you pass away and that account has four POD beneficiaries, each one would receive $25,000.
• Note that state law may limit the number of beneficiaries you can name to a payable on death account. Your depository institution may have additional rules for POD accounts.
Types of Accounts That Can Be Payable on Death
There are a number of account types that can be established as POD accounts. Your options can include:
• Checking accounts
• Savings accounts
• Certificate of deposit (CD) accounts
• Individual Retirement Accounts (IRAs)
• Investment accounts
You can make a bank account that you own by yourself or with someone else a POD account, though again note that the co-owner could not be listed as a POD beneficiary.
In terms of what accounts cannot be POD, the list includes small business and commercial bank accounts as well as safety deposit boxes.
Credit accounts are not POD accounts either, since there are no assets to leave behind. In terms of what happens to credit card debt when you die, it can become the responsibility of your spouse or your estate, depending on where you live.
Recommended: Why It’s So Hard to Save Money Today
Payable on Death vs Beneficiary
Payable on death refers to a specific type of financial account that’s used to pass assets to someone else. The term “beneficiary,” however, is used to refer to an individual or entity that’s entitled to inherit assets from someone else. POD beneficiaries fall under the larger beneficiary umbrella.
Similarities
Here are some ways in which POD accounts and beneficiaries are the same. When you name a payable on death beneficiary, you’re telling your bank that you want that person or entity to receive money from the account when you pass away. In a sense, that’s no different from naming a beneficiary to a 401(k) plan or a life insurance policy. Your life insurance beneficiary, for example, is entitled to receive a life insurance death benefit from the policy when you die.
Payable on death beneficiaries and life insurance or retirement plan beneficiaries are not entitled to any money during your lifetime. They can’t access your bank account, withdraw money from your 401(k), or cash in your life insurance. But they all stand to benefit financially from your passing in some way.
Additionally, assets that have a named beneficiary are not subject to probate. So, if you open a Roth IRA and name your spouse as the beneficiary, they’d have access to the money in the account when you pass away. The same is true with regard to life insurance.
Differences
The main difference between payable on death accounts and other beneficiary accounts lies in what’s being passed on. With POD accounts, you’re typically talking about bank accounts. So you might leave your checking account or savings account to your children after you’re gone.
As mentioned, you can name beneficiaries for other types of assets such as a 401(k), IRA, investment account, or life insurance policy.
There can also be differences between payable on death accounts and other beneficiary accounts with regard to taxation. Someone who inherits a POD account may owe estate taxes, for instance, whereas life insurance proceeds are typically income and estate tax-free. (Determining how to allocate one’s funds and the tax burden that will result can be an important part of estate planning.)
Recommended: Tips to Improve Your Money Mindset
Pros and Cons of POD Accounts
Payable on death accounts can offer advantages and disadvantages. It’s helpful to weigh both sides before opening one.
Here’s an overview of the main pros and cons of POD accounts.
Benefits
Drawbacks
You retain control of the account and the assets in it during your lifetime.
Beneficiaries would not be able to access funds if you were to become incapacitated.
Payable on death accounts are not subject to the probate process.
Your bank may require you to close a POD account in order to choose a new beneficiary.
Depending on state law, you may be able to name multiple beneficiaries.
State law may restrict the number of POD beneficiaries you can name.
Removing POD accounts from probate can allow beneficiaries to access funds quicker.
It can be complicated for estate executors to access funds to settle a larger estate using POD deposits.
Payable on Death Account vs Trust
A POD bank account differs from a trust in a couple of key ways.
• In a typical trust arrangement, the trust creator or grantor transfers assets to the control of a trustee. The trustee manages those assets on behalf of one or more named beneficiaries. Assets held in trust are not subject to probate when the trust grantor passes away.
Probate is a legal process in which someone’s assets are inventoried, outstanding debts are paid, and remaining assets are distributed according to the terms of the decedent’s will. Dying without a will in place means assets would be distributed according to state inheritance laws.
• In a Totten trust or POD bank account, there’s no trustee. However, by designating an account as payable on death you can still remove the assets in the account from probate. That’s an advantage, as probate can be both lengthy and time-consuming.
The Takeaway
You might consider a payable on death account if you’d like to pass assets on to loved ones with minimal fuss. That could be helpful if you’d like to make sure they have easy access to cash to cover funeral and burial expenses or any basic living expenses after you’re gone.
Regardless of whether you opt for a POD account or not, choosing the right bank matters. With a SoFi Checking and Savings account, you’ll spend and save in one convenient place. You’ll earn a competitive annual percentage yield (APY) and pay no account fees, which can help your money grow faster.
Better banking is here with up to 4.20% APY on SoFi Checking and Savings.
FAQ
What does payable on death mean?
Payable on death means that money in account is payable to one or more beneficiaries when the original account owner passes away. A payable on death bank account allows beneficiaries to receive funds without having to go through the probate process.
Is a POD on a bank account a good idea?
Adding POD beneficiaries to a bank account could be a good idea if you’d like to make sure the money in the account goes to whom you want it to after you pass away. You could also choose to set up a payable on death bank account simply to allow those assets to bypass the probate process after you’re gone.
What is the difference between a pay on death and a beneficiary?
Payable on death is a designation that applies to bank accounts and other financial accounts. A beneficiary is someone who’s named to receive money from a bank account, retirement account, or other asset, such as a life insurance policy. A POD account can have one or more beneficiary designations.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. SOBK0323031
Save more, spend smarter, and make your money go further
Most of us have heard it before — newly released data on the net worth of CEOs well into the millions, or even billions.
Take Jeff Bezos for example, whose net worth is estimated to be roughly $144 billion as of October 2022. As you may suspect, that’s certainly not representative of most Americans’ wealth. In fact, the average net worth by age in the United States is $746,820, though many argue that median net worth by age — which is $121,760 — paints a more useful picture.
So what is net worth? Net worth is a calculation used to gauge your overall financial health, but it’s a benchmark that tends to uncover more questions than answers. What does net worth mean, what factors determine its value, and what is a “good” net worth by age, anyway?
Here, we’ll unpack the average net worth by age in America, learn how to calculate your net worth, and reveal how to increase net worth so that you can set — and achieve — your personal finance goals.
Key Findings
The average net worth by age in America is $746,820.
The median net worth by age in America is $121,760.
Net worth is calculated by subtracting the total value of your debts from the total value of your assets.
Average Net Worth by Age
Age
Average Net Worth (Mean)
Younger than 35
$76,340
35–44
$437,770
45–54
$833,790
55–64
$1,176,520
65–74
$1,215,920
75 or Older
$958,450
Source: Federal Reserve
The average net worth by age in America is $746,820, according to the Federal Reserve’s 2020 Survey of Consumer Finances, which includes data from 2016 to 2019.
It may come as no surprise to learn that older Americans tend to have a greater average net worth than younger Americans. After all, their financial assets have had years — if not decades — to appreciate in value. Average net worth by age peaks somewhere between 65 and 74 years. This is also roughly the age when most Americans retire. At age 75 and older, when sources of income tend to be fixed, average net worth begins to decrease.
Median Net Worth By Age
Age
Median Net Worth
Younger than 35
$14,000
35–44
$91,110
45–54
$168,800
55–64
$213,150
65–74
$266,070
75 or Older
$254,900
Source: Federal Reserve
The median net worth by age in America is $121,760, approximately a 17 percent increase from the previous survey conducted in 2016. The median — or middle number in a set of data — is the halfway point between the largest and smallest net worth.
Median values tend to be less affected by outlier data points — like the net worth of billionaires — than averages. For that reason, some argue that median net worth offers a clearer picture of and benchmark for wealth in America.
What Does Net Worth Mean?
What is net worth, and what does it mean? Your net worth is your total assets minus your liabilities. In simple terms, it’s the cost of everything you own after subtracting your debts.
It can be dangerous to measure your financial health solely by what you earn, especially since you might not save or use your income towards investments. Your net worth will keep you in check, allowing you to be cognizant of your worth and how much you should be saving until you reach retirement.
What Net Worth is Considered “Rich?”
You may wonder what net worth qualifies as “wealthy” in America — and how far off you are. According to a 2022 survey, Americans consider an average net worth of $2.2 million to be “wealthy.” However, perception of wealth may look very different at the state and city levels, as average household income and cost of living tend to fluctuate dramatically based on geographic location.
For example, people who live in Denver say that an average net worth of $2.2 million is enough to be considered wealthy, whereas people in San Francisco say that you’d need more than double that amount —- an average net worth of $5.1 million.
How to Calculate Net Worth
1. Add Up Your Assets
The first step to calculating your net worth is adding up the total value of your assets. This includes the current market value of your investment accounts, retirement savings, home(s), vehicle(s), items of significant value (art, jewelry, furniture, etc.), and the cash value of your checking, savings accounts, and insurance policies.
2. Add Up Your Debts
Next, you’ll want to add up the total value of any debts you owe. This includes your mortgage(s), car loan(s), student loans, personal loans, credit card debt, and any other form of debt.
3. Subtract Your Debts From Your Assets
Once you subtract your debts from your assets, the resulting value is considered your personal net worth. Your total could result in a positive net worth or a negative net worth.
Don’t panic if you find yourself in the negative net worth category. It’s normal for young professionals fresh out of high school or college to have low or negative net worth, especially if they’re still paying down student loans, recently purchased a home, or are just starting a plan to build their savings.
What is a “Good” Net Worth By Age?
Your age plays a significant role in calculating your net worth, especially as you get closer to retirement age. To help you understand how you stack up, we took a look at the average and median net worth of every age group to reveal what you should aim for at each milestone.
Average Net Worth by Age 35
Your 30s should be mostly devoted to laying your financial foundation so that you can achieve your desired net worth by retirement. At this age, it’s important to set a budget for you and your family, and stick to it.
The Benchmark
The average net worth for families in the U.S. under the age of 35 is $76,340, where the median net worth is $14,000; a helpful reminder that the average can be easily distorted by a small percentage of the wealthiest Americans. With the average student loan debt at about $35,000 per person, it’s no wonder why people might have a lower net worth in their 30s.
How to Increase Net Worth
Your 30s are a perfect time to set yourself up for a bright financial future — even if your net worth is still relatively low. If you haven’t started already, consider contributing to your retirement at this point, especially if your employer offers a company match to your 401(k) or 403(b).
A goal to aim for is to have the equivalent of half your annual salary saved in your retirement account by the time you’re 30, but don’t worry if you’re not there yet. At this time in your life, it’s most common to focus on making progress on paying back your debt, which can lead you towards financial security.
Average Net Worth by Age 45
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The Benchmark
The average net worth for American families ages 35 to 44 is $437,770, and the median net worth is $91,110. This demonstrates a natural progression as Americans begin to spend time in their careers, making higher salaries than those they earned fresh out of high school or college. They’ve had ten years at that point to pay down some debt, and perhaps save for the purchase of a first home.
How to Increase Net Worth
By the time that you’re in your 40s, your goal is to have a net worth of two times your annual salary. For example, if your salary is $75,000 in your 30s, you should aim to have a net worth of $150,000 by the time you’re 40 years old.
It’s common for people in their 40s to increase their net worth by investing in real estate and continuing to grow their retirement savings. Owning a home is an asset that could greatly increase your net worth since it can appreciate over time.
Average Net Worth by Age 55
By your 50s, you should begin to see significant progress made toward your net worth based on real estate investments, contributions to your retirement plan, and other investments. By the time you’re 50, your goal should be a net worth of four times your annual salary. For example, if you’re currently making $90,000 per year, your net worth should be at $360,000.
The Benchmark
The average net worth for Americans between the ages of 45 and 54 is $833,790, while the median net worth is $168,800.
How to Increase Net Worth
At this point, consider becoming more aggressive when it comes to building your net worth. To do this, consider maxing out your 401(k), meaning that you contribute as much as is legally allowed. And, if you haven’t already, this may be a good time to contribute to an IRA, an account that allows you to save for retirement with tax-free growth or on a tax-deferred basis.
If you have children, you may also want to consider contributing to a 529 college savings plan, a tax-advantaged savings plan for education costs, but make sure to prioritize your retirement first.
Average Net Worth by Age 65
In your 60s, your goal is to have a net worth of roughly six times your salary. For example, if your salary is $120,000, you should aim to have a net worth of $720,000. At this point in your life, your net worth will help you understand how much wealth you’ll have once it’s time to retire — and how early you can.
The Benchmark
The average net worth for Americans between the ages of 55 and 64 is $1,176,520, while the median net worth is $213,150, according to the most recent data from the Federal Reserve.
How to Increase Net Worth
To help you reach your goals, you may want to begin thinking about how you can lower your cost of living and capitalize on your investments. If you live in a house, but no longer need all of the space, could you consider downsizing? No need to make any immediate decisions, but with retirement only a few years away, you’ll want to begin looking at how you are going to benefit from your investments.
You’ll also want to consider purchasing disability insurance dependent on your health and genetics. If you’re unable to work during these final years leading up to retirement, disability insurance can help replace the income that you lost without decreasing your net worth.
Average Net Worth by Retirement
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By the time you’re ready to retire, you should aim to have a net worth of roughly six times your annual salary.
While it’s impossible to know exactly how many years following retirement you’ll need to plan for, it’s one of the many reasons it’s so important to start saving as early as possible. It can even lead to some deferring retirement and working beyond the normal retirement age.
The Benchmark
The average net worth for Americans between the ages of 65 and 74 is $1,215,920, however, the median net worth is $266,070.
Use the resources that you built throughout your life to fund retirement. You’ll also want to consider what age you want to start receiving your Social Security since the longer you delay it, the more your monthly income will be.
How to Increase Net Worth
From investments to saving, there are many ways to increase your net worth. Once you calculate your current net worth, use these general tips to help set you up for success by the time you retire:
Cut Expenses: The less that you’re spending, the more that you’re growing your net worth. See if there are bills or spending habits that you can reduce. Even if it’s only a few dollars, you’d be surprised by how much that can add to your net worth over the years.
Reduce Debt: Your debt is what could be holding you back from growing your wealth, and with high interest rates, it could be taking longer than expected. Making higher monthly payments or consolidating payments could help reduce your debt faster.
Pay Off Your Mortgage: Owning a home can become your biggest asset, so paying it off will help increase your net worth.
Make Investments. It may not be ideal to just let your money sit in savings. Consider investing part of your paycheck with a goal to reap the benefits when you reach retirement age.
Max Out Retirement Contributions: Make the most of tax-advantaged retirement plans even in your lower-earning years. If you start investing now, your net worth may increase at a much faster pace.
Set Goals: It may sound simple, but it’s easy to become passive about investing in the future if you don’t have hard goals set in place. Create a plan as to how you’re going to grow your net worth over the next 10, 20, or even 30 years — and stick to it.
Once you make a plan to build your net worth, check in with yourself and calculate how you’re pacing against your goals on a regular basis. And, before making a big purchase or an investment, keep this number in mind to make sure you’re making the right financial move.
Ready to start achieving your financial goals? Sign up for a free account today and let us help you get there.
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Financially-minded people sometimes throw around a figure called “net worth.”
Perhaps you’ve heard of celebrities (like Jay-Z 0r the Kardashians), politicians (like Donald Trump or Mitt Romney), or business owners (like Bill Gates or Mark Zuckerberg) talk about their net worth.
So what is net worth anyway?
Great question. In this article, I’m going to explain exactly what net worth is and how to calculate your net worth (and, why you’d want to do so in the first place).
But first, a quick disclaimer about net worth . . . .
You, my friend, are not valuable because of your net worth. You are intrinsically valuable.
You are a human being who can contribute much to this world, and that’s just one reason you’re much more valuable than your net worth. So if you find that your net worth is a negative number (yep, it happens), don’t be discouraged.
Alright, are you ready to learn about net worth? Let’s do this.
What is Net Worth?
Net worth is a figure that is calculated by subtracting the sum of your liabilities from the sum of your assets.
In other words, it’s would be left over if you were to pay off all of your debts with what you own outright.
Here’s what the formula looks like: Assets (What You Own) – Liabilities (What You Owe) = Net Worth.
Now, you might be asking which assets and which liabilities to include in this calculation. That’s simple: everything.
This includes everything from your mortgage (a liability) to the pen in your desk drawer (an asset). Many times, people and institutions don’t put a value on the smaller items individually, but they simply provide a rough estimate of their assets of lesser value.
Examples of Net Worth Calculations
Perhaps one of the best ways to understand net worth is to look at a few fictitious examples. Here are a few for your consideration.
The Smith Family
The Smith family is pretty poor, and doesn’t have much in the bank. In fact, they only have $1,250 in their checking account.
They have $1,000 in a 401(k), a mortgage on which they owe $160,000, and a decent house that’s worth $140,000 (it fell in value over time).
They also have two cars. Thankfully, one is paid off (it’s worth $3,400) but the other they still owe $10,100 – its value is $12,200.
Finally, they have a few assets (furniture, trinkets, and the like) that are valued at around $5,000.
Let’s go ahead and calculate their net worth using the figures above, shall we?
One of the best ways to do this is to make a list of their assets and their liabilities.
Assets
The Smith family has the following assets:
$1,250 – Checking Account
$1,000 – 401(k)
$140,000 – House
$3,400 – Car 1
$12,200 – Car 2
$5,000 – Furnishings and Trinkets
The above assets total $162,850. Wow! That’s looks amazing, right? Not so fast . . . .
Liabilities
The Smith family has the following liabilities:
$160,000 – Mortgage
$10,100 – Car 2
The above liabilities total $170,100. Not so good.
Net Worth
Remember our formula for net worth? Assets – Liabilities = Net Worth.
This means that the net worth of the Smith family is a negative number: -$7,250. Now, that’s not actually a horrible net worth. Things could be worse! But there’s certainly a lot of room for improvement.
The Jones Family
Let’s take a look at one more example.
The Jones family is doing pretty well. They have a checking account worth $6,500 and an emergency fund valued at $35,100. Interestingly, they rent a small apartment, so housing doesn’t come into the equation for them.
Now, they do have one small student loan on which they owe $2,000. They also have quite a few furnishings and trinkets valued at $15,300. Additionally, they have two Roth IRAs, one valued at $10,400 and the other valued at $3,650.
Both of their cars are paid off with one valued at $10,500 and the other valued at $16,700.
Let’s calculate their net worth.
Assets
The Jones family has the following assets:
$6,500 – Checking Account
$35,100 – Emergency Fund
$15,300 – Furnishings and Trinkets
$10,400 – Roth IRA 1
$3,650 – Roth IRA 2
$10,500 – Car 1
$16,700 – Car 2
The above assets total $98,150. Whoa. Wait a minute.
Their assets total less than the total of the Smith family’s assets!
But remember, assets don’t tell the whole story . . . .
Liabilities
The Jones family has the following liabilities:
$2,000 – Student Loan
Wow. Their liabilities total – you guessed it – only $2,000.
Net Worth
Let’s use the formula again and take a look at their net worth.
This means that the Jones family has a positive net worth. Fantastic!
Comparing the Families Net Worth
By comparing these two examples, we learn that looks can deceive. If, for example, someone were to compare the homes of both families, they might assume that the Smiths are wealthier than the Jones family.
After all, the Smiths live in a house and the Jones family lives in an apartment. But the truth of the matter is that the Jones family has a higher net worth than the Smith family.
Still, if someone were to compare their vehicles, they might conclude that the Jones family is better off. While this is true, comparing the vehicles of both families does not necessarily indicate the net worth of each family.
For that, everything must be taken into account.
Why Calculate Net Worth?
As you can see from the examples of the families above, somebody’s net worth is something that is hidden from the view of the public unless, of course, that someone chooses to reveal their net worth.
Even still, what’s the point in revealing one’s net worth to others? There really isn’t a good reason, unless you’re trying to prove something.
However, there is one good reason to calculate your net worth. Have you guessed it?
It’s worthwhile calculating your net worth because you can compare your current net worth to your previous net worth. Okay, so maybe you can’t go back in time and calculate your net worth (although you might be able to find a paper trail).
Big deal. Start now!
By tracking your net worth over time, you can get a feel for your financial progress (or lack thereof). It might encourage you to get another job, pay off some debt, or put a budget together so you can save some more money!
Net worth is a powerful figure because it takes into account both your assets and your liabilities.
In other words, it forces you to not only consider one factor in the equation, but rather the whole equation.
Instead of looking only to your assets (which may look and feel appealing) or only to your liabilities (which may seem overwhelmingly burdensome), calculating your net worth lets you take a look at the balance between these two figures – a balance that can be tracked over time as a reliable measure of financial health.
How to Calculate Your Net Worth Over Time
Alright. You know it’s a good idea to calculate your net worth.
How should you get started?
If you have spreadsheet software on your computer, you can make a really simple spreadsheet to keep track of your net worth over time. Create two columns: one column for your assets and one column for your liabilities.
List out your figures respectively in each column, and if you’re fancy, program it to total the columns and subtract the liabilities total from the assets total.
This will give you your net worth.
But you can do more than this – and perhaps you should. Recalculate your net worth every single month.
Over time, you’ll be able to see your net worth go up or down in value. This is a fantastic visual aid in understanding how you’re doing with your finances.
Once you’ve calculated your net worth and have a few months of data, don’t just stare at the numbers – do something! If your net worth is increasing, ask yourself why and keep doing those things.
If your net worth is decreasing, ask yourself why and change something!
If you’re in that second camp, or your net worth simply looks grim, here are a few articles you need to read:
Thanks for learning about net worth. If you haven’t calculated your net worth yet, get to it! What you find just might be the fuel you need to make positive changes in your life.
I’ve been a full-time professional blogger for more than a year now. It has been a fantastic experience, a sort of dream come true. But blogging for dollars is not without its drawbacks. As I’ve shared before, I feel socially isolated. I spend most of my time in this office, writing about money.
Also, the income can be irregular. For some bloggers, it is very irregular. One month you might have record earnings — and the next you might experience your own personal financial crisis. Bloggers aren’t the only folks who struggle with the fluctuating incomes, of course. Many self-employed people face the same issue, as do those whose pay is tied to commission.
Creating a budget when your income fluctuates can be a frustrating experience. I am sure that each of us finds our own ways to cope. Today, I want to share the method that I’ve developed.
Projecting Income
Most articles I’ve read on this subject suggest basing your budget on your average monthly income from the past 12 (or six or three) months, but I don’t recommend that unless your income has wild swings — $12,000 one month and $0 the next. As this past year has demonstrated, incomes can and do decline. A prolonged decline wreaks havoc with the “average income” budgeting method.
When I project my cash flow, I base it on my minimum monthly income from the past 12 months. Using my minimum monthly income instead of my average monthly income gives me a safety buffer. And when you have an irregular income, a safety buffer is vital.
Note: If your income is variable, but you know that you will always make at least $X,XXX, then it makes sense to base your budget on $X,XXX. Anything you earn above this amount is gravy.
A Hypothetical Example
For the sake of illustration, I constructed a hypothetical example of the monthly income a freelance designer might have earned in 2008:
Hypothetical 2008 income
The “actual” column shows the designer’s actual income by month. The “average” column shows the average for the entire year. Using the standard advice, this designer would then construct her 2009 budget based on the average monthly income from 2008. Her 2009 budget would be $3,891.67 per month. But what if her income declined in 2009, as has happened to many freelancers? Here is a plausible scenario:
Hypothetical 2009 income
In this instance, the designer’s average monthly income for 2009 was $3,600, or nearly $300 less than she budgeted. And because her first few months were fantastic, she might have been tempted to splurge beyond her budget. That would have been a mistake. If, instead, she had constructed a budget based on her lowest month in 2008, she would have done okay.
Now, obviously I fabricated these numbers out of thin air in order to make a point. But based on recent conversations with a variety of people who earn irregular income (bloggers, designers, contractors, entrepreneurs), many folks are facing this sort of situation in 2009. Their incomes have dropped, and their budgets weren’t ready to cope with this.
Building a Budget
Projecting cash flow is only part of the battle. After finding a basis for my budget, I followed a simple system to manage my money. I recommend using two different bank accounts to make this work:
The first is your “business” account (without quotes for those of you who actually own businesses), which is where you deposit all of your income. My business account is a high-yield savings account with ING Direct. (You might use FNBO Direct or some other bank. Just choose something with a high interest rate.)
The second is your personal account, and it is from this that you will pay your ongoing expenses. There is no need to open a new account if you already have one that will work. I just use my existing credit union checking account.
Every month as you earn income, receive it (and leave it) in your business account. This is where you accumulate your cash. Because it’s in a high-yield account, it earns interest as it waits for you to use it.
From this money, pay yourself as if you were an employee. Your monthly salary is whatever you calculated as your monthly budget, your minimum monthly income from the past 12 months. On a set date each month, write yourself a paycheck. Leave the rest of the money in your business account. (Here’s more on the “virtual employer” concept.)
At I’ve Paid for This Twice Already, PT writes that “the key to budgeting with irregular income [is to] make it mimic regular income as much as possible.” I agree.
At the end of each year, three things happen.
First, you reset your salary. Based on the previous year’s numbers, your income might increase — or it might decrease.
Next, you use the “extra” money you have been accumulating in your business account to pay taxes. I could write an entire article on budgeting for taxes with an irregular income, but for now let’s just note that it is very important that you remember to account for them, especially if nobody else is withholding them from your paycheck.
Finally, if you have anything left after paying taxes, you pull this money out of the business account as personal income. It is, in essence, a year-end bonus. You can use it for whatever you see fit: debt reduction, long-term savings, a Mini Cooper.
Reading through this, my system seems complex. It’s not. It is actually very easy. To summarize: I base my budget on my lowest monthly income from the previous year. When money comes in, it sits in a high-yield savings account. Each month, I write myself a paycheck based on my budgeted amount. The rest of the money is saved to pay taxes. If there’s any left over at the end of the year, I get a bonus.
Note: The first year is difficult. You generally don’t have the ability to base your budget on averages or on the lowest income from the last 12 months. (I was able to do this because I’d been earning money before I quit to blog full-time.) Instead, you’ll have to use some other method to project your income. Whatever you do, remember: It is easier to deal with a budget surplus than it is to deal with a budget deficit!
Tips and Tricks
There are few other things that make living with an irregular income go more smoothly. The following tips and tricks build on the core personal finance skills we discuss often here at Get Rich Slowly:
Establish a foundation of thrift. The number one thing that helped me cope with an irregular income was adopting a lifestyle of thrift. I took steps to slash my spending. I decreased my recurring monthly expenses. I found cheap or free alternatives to the things I used to spend money on (Hulu instead of cable television, the public library instead of the bookstore, etc.).
Prioritize spending. Many of the budgeting guides I’ve read suggest creating a list of prioritized expenses. Financial guru Dave Ramsey, for example, recommends listing all of your expenses in order of importance. (“Importance, not urgency,” he says.) When you get paid, start at the top of the list and work down. This is an excellent method for those who are struggling to make ends meet.
Build a buffer of savings. Before I quit my “real” job to become a full-time blogger, I began to set aside a large sum of money as an emergency fund. I figured that if my income dropped below the minimum I needed to get by, I could tap the emergency fund to provide supplemental cash. With luck, I’d be able to ride out any rocky storms. (I’ve been fortunate to not have to do this.) When you have an irregular income, the bigger your emergency savings, the better.
Tap your business account only as needed. As money accumulates in your business account, you will be tempted to draw from this pool for fun and games. Don’t do it. Remind yourself that this money is for taxes — and for your monthly salary.
Resist lifestyle inflation — especially during the good months. Lynnae at Being Frugal writes: “One of the biggest downfalls of having a variable income is the tendency to overspend on good months. Believe me, I understand. Your money is stretched to the limits in the lean months, so on a good month, you’re tempted to spend a little bit more on fun stuff. But when the next lean month comes, there’s no extra money left to help ride it out.”
If possible, live off just one income. If you have an irregular income but you have a partner who makes steady money, explore the possibility of living solely on her income. Use your partner’s money to meet the necessities, and use yours to pay for savings and extras. This isn’t an option for most people; but if you can manage it, it is a great way to budget.
Do you have irregular income? If so, how do you budget for the fluctuations? Can you offer any additional tips? I am especially interested in tips for those who are just getting started with self-employment or variable incomes.
Whenever we talk about home improvement, décor, and other aspects of construction, we regularly use home improvement terms like home or building remodeling, renovation, and restoration. And while we tend to use them interchangeably, that shouldn’t be the case.
As you might guess, the three terms all bear different meanings, yet are closely related to each other, which often creates confusion. In this guide, we’ll go deeper into their meaning and compare these three home improvement terms for you to know exactly which one to use, and when.
Overall, these terms are normally used when a property or a housing unit needs a tune-up. It could be damaged by natural disasters or simply needs an update to make it look presentable and functional for the next homeowners or renters.
Restoration, renovation and remodeling are three projects that aim for one goal — to restore or improve a home. Now, let’s clarify them a little further.
What’s a renovation?
Building renovation refers to the process of making an object (a home or any other type of establishment) look and function like new. The process focuses on making use of what is already present and readily available, fixing it, and adding new items for maximized comfort and functionality.
This makes the renovation the most affordable option, when compared to remodeling.
As some project managers would describe it, renovation takes creativity and a great deal of resourcefulness. Moreover, it proves to be more cost-effective than remodeling, making it more appealing among homeowners with have limited financial resources.
Renovations and restorations usually go hand in hand. Let’s say that you have a house with a bathroom with cracked walls and filled with rusty showerheads. You restore the bathroom to its original condition and renovate it by adding a new bathtub and other items to make it look modern.
What’s a restoration?
From a historical viewpoint, a home restoration is when you recreate the look to match its original form, in all its glory. For example, if the home initially had a blue interior, you’d want to restore it with blue paint. Likewise, if it had a Victorian feel, you’d want to buy pieces that match.
Restoration can be compared to the process of maintaining the property from its original state so that gradual deterioration won’t be noticed. This method can be used when your water system gets destroyed by a natural disaster. Or when fire or a flood has taken a toll on your home’s beauty. In most cases, you’d need to hire professionals like asaprestoration.net to help you with the restoration process.
Of the three processes, home or building restorations can be the cheapest. In addition, it requires less energy for conceptualization and the actual process itself. It doesn’t require a hectic level of manual labor that other types of home improvement projects come with.
What’s remodeling?
The most tedious and daunting process of the three is home or building remodeling. It involves taking a worn-out property and reimagining it into a more modern or functional one.
Most remodeling projects entail fairly complex work like expanding the property, removing, gutting or adding walls, and adding cooling/heating systems. Among the three, remodeling is deemed the most expensive, as you’ll need new materials and additional items to complete the project, more time to finish, and a lot of people to help accomplish your vision.
According to established project managers and contractors, it is best to assess whether you have the funds for remodeling and if you do, ask for a cost estimate so you can agree to a remodelling contract that’s within your budget. Don’t forget to set aside a contingency fund for unexpected problems.
Now that you have a clear idea of the difference between remodeling, restoration, and renovation, you can carefully assess what project to undertake to achieve your house goals. Take into account the property’s condition, your financial resources, and your vision to make sure you’re spending within your means and still get the results you want.
More tips for your fancy home
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In my recent review of Pam Slim’s Escape from Cubicle Nation, Chett left the following comment:
I was talking with a good friend last week who is self-employed. I told him I envied his entrepreneurial spirit and the ability to “go it alone.” He told me he envied my work as a teacher and the set hours and guaranteed pay check and insurance. (I told him there was nothing “set” about the hours, so I guess we both misunderstood each others work.)
So many people dream of working for themselves and only find out the true benefits and heartaches after they make the leap. Take you for instance, what do you miss the most from the box factory in terms of security, or interaction? What bothered, (or motivated) you the most to drive you to self-employment and what have you learned about your decision over the past year and a half?
In the same thread, Caitlin wrote:
Every time I real an article like this I wonder if I’m really that unusual because I love my job. I’m a molecular biologist, and it’s just not something I could do on my own…I’ve had a small side business for over 5 years. In that time, interesting and educational though it was, I’ve learned that I don’t particularly want to run a business.
I am not one who believes that everyone should be an entrepreneur. I think there’s a sort of continuum: Some folks should absolutely work for somebody else, others should definitely work for themselves, and many should do a little of both.
Although I tend toward entrepreneurial endeavors, I don’t consider myself a die-hard entrepreneur. The best job I ever had was actually flipping burgers at McDonald’s when I was in high school. I’m not kidding. I loved that job. My fellow employees were smart and fun. Together, we made serving burgers and fries a game; we tried to do the best job we could. Our manager was great, and she fostered this attitude instead of stifling it with bureaucracy.
Since then, I’ve had jobs I loved and jobs I hated, and many that just paid the bills. I’ve also tried self-employment twice: once as a computer consultant, and now as a professional blogger.
Here are my responses to Chett’s specific questions:
What Do I Miss From the Box Factory?
I miss daily interaction with my family. My father began the business almost 25 years ago, and since then there have always been several family members involved with the daily operations. I also miss talking with my customers. As much as I disliked the actual sales portion of my job, I genuinely liked many of the customers I dealt with. I find myself wondering how Robert is doing, and whether Lance finished building his house.
There is almost no social aspect to the life of a professional blogger; I sit here alone in my office typing all day. While this is intellectually challenging, I miss seeing people and being a small part of their lives. This is one reason I’ve struggled with my restaurant spending over the past year. I often go out to lunch simply to be near other people. It’s also one reason I rented office space.
Note: Trent and I both discussed this loneliness on last Monday’s episode of The Personal Finance Hour. How bad does this loneliness get? Very bad. It’s Thursday afternoon as I write this. A couple of hours ago, I had a near panic attack from the loneliness. No joke. To cope, I came down to the coffee shop for a couple of hours.
What Motivated Me to Self-Employment?
There were a couple of things. First, I did not like my work at the box factory. I did not like sales. I wasn’t good at it, it didn’t interest me, and I found it frustrating.
Meanwhile, I wanted to write. I’ve always wanted to be a writer; I just never knew how to make money from this desire. When I stumbled into personal-finance blogging, I was startled to learn I could make an income from it. It seemed natural to make the leap to professional blogger once that income sustained at a level that could support me.
What Have I Learned About My Decision Over the Last Year-and-a-Half?
There’s a difference between blogging as a hobby and blogging as a job. When you’re blogging as a hobby and the income is “extra” income, the process is fun. It’s a lark. But when you throw the switch and it becomes your sole means of making a living, some of that fun vanishes.
I still love what I do — no question — but sometimes I feel as if I’ve lost the spontaneity I used to have. That’s one reason I’m hoping to reduce my workload around here a little. I’d like to pursue other projects: write a book, dabble with other blogs, possibly promote financial literacy education.
There’s a lot of pressure when you are required to generate your own income. Sure, there’s pressure when you work for somebody else, too, but there’s also a sense of freedom. You’re not responsible for the daily decisions. And if you don’t like the job, you can leave. Plus, the actual source of income is not your responsibility.
I often think that working for somebody else is like renting an apartment; working for yourself is like owning your home. Both have their rewards, but they each have drawbacks, too.
Conclusion
As Caitlin mentions, not everyone is cut out to run a business. It just doesn’t interest them. My wife is a perfect example. Kris loves her job. It’s challenging and fulfilling, and she enjoys the interaction with her co-workers. She has no desire to strike out on her own.
As always, I think it’s important to do what works for you.
Now I’d love to hear from you. Have you ever been self-employed? Did you love it, or did you hate it? What prompted you to pursue entrepreneurship? What do you envy about those who work for somebody else? Or, if you work for somebody else, are you content with where you are, or do you envy about the self-employed? What is it that keeps you doing what you’re doing?
Save more, spend smarter, and make your money go further
Even as interest rates approach lows last seen in, oh, 50,000 BC, U.S. savings bonds are still a great deal.
I’m an obsessive fan of savings bonds, particularly Series I, or I-bonds, for short. Since I wrote about them last year, a few aspects of buying and giving them have changed, but the basic message hasn’t: if you aren’t buying savings bonds, you’re missing out on a safe, simple, and relatively high-yielding investment available to anyone with a social security number.
Let’s recap briefly what is so great about I-bonds:
– They pay an interest rate tied to the rate of inflation. You won’t lose purchasing power, and if you’re concerned about high inflation in the future, I-bonds will protect your savings. Most savings accounts, CDs, and other Treasury bonds pay less than the prevailing inflation rate. Right now, for example, I-bonds are paying 2.2% APY, which is more than almost any 5-year CD.
– Each person can buy up to $10,000 per year.
– You can set up an account in minutes and start buying I-bonds online at TreasuryDirect.gov.
– You can cash them in after one year or hold them for up to 30 years. (There’s a small penalty for redeeming I-bonds before 5 years.)
– I-bonds are tax-deferred and can be used for a child’s college education tax-free.
The way I always sum it up is: nobody regrets buying I-bonds.
The gift of aaaargh
The big change in bonds since last year: they got rid of paper savings bonds. If you’re buying bonds for yourself, no big deal. Buying online is easy — all you miss out on is the cool pictures of Einstein and Chief Joseph and Helen Keller.
If you want to give a savings bond as a gift, however, the process is about to get a little awkward, because the recipient of the gift has to have their own Treasury Direct (TD) account. For example, say I want to give my niece a $25 I-bond. I can buy the bond right away and keep it in the “Gift Box” section of my TD account. To transfer it to my niece, however, I have to:
– Call or email my brother and tell him to open a TD account for himself, then a subaccount for his daughter (oh, and another subaccount for his son, if I want to give him a bond, too).
– Have him give me the kid’s TD account number. Yes, it is safe to share your TD account number. No, this is not intuitive.
The Treasury has produced a YouTube video, complete with that reassuring “Welcome to your first day at work”-style voiceover, to explain how to give electronic savings bonds as gifts. Honestly, I would rather call my grandmother and ask her if she has any tech support questions for me.
Instead, I called Jerry Kelly, director of the Treasury’s Ready.Save.Grow campaign. His response, in short: Believe me, we know. “There are a lot of things we’re looking at to simplify the process,” said Kelly. “One of the things we keep in mind for simplicity is PayPal, or, for example, or iTunes. We want to get there eventually. It’s going to take us time.”
I asked Kelly whether anyone is using the gifting feature. “It’s certainly not as robust as paper was, and we knew that that would happen,” he replied.
This isn’t good enough for Mel Lindauer, a Forbes columnist, coauthor of The Bogleheads’ Guide to Investing, and a man even more into savings bonds than I am. “The answer is simple,” said Lindauer by email. “Bring back paper I-Bonds and give investors an option. Prior to the elimination of paper I-Bonds, investors overwhelmingly chose paper I-Bonds over TD.”
Stay safe out there
Lindauer ticked off a variety of objections to Treasury Direct, most damningly the fact that, unlike your bank’s website, TD doesn’t promise you’re off the hook in the event someone fraudulently cleans out your account.
“There is an element of truth to that,” said Kelly, but in over ten years and hundred of thousands of TD accounts, no customer has lost a dime to fraud. “We have had people who’ve had problems, but we have not held them accountable for it, because we haven’t deemed them to be negligent with their access information.” He mentioned the guy who put his Social Security number on the side of his truck. If someone did that with their TD password, “we probably would not have a whole lot of sympathy for them.”
And a TD account is not like a checking account: it’s designed to be easier to put money in than take it out. In order to steal my I-bonds, you’d not only need access to my password and my email account (TD sends a one-time passcode via email when you log in on a new computer), you’d then have to link my account to new bank account, which would leave an obvious trail.
In short, it would be even more work than convincing my brother to open a TD account for my niece. Please do not take this as a challenge.
To sum it up
– I-bonds are still an awesome, flexible, safe investment.
– The process for gifting them is too complicated, and no one blames you if you wait until they fix it.
– Buying them for yourself is a snap.
– I’m probably about to get a call from my grandmother asking if she can treat computer viruses with ibuprofen.
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.
Save more, spend smarter, and make your money go further
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For most people, their health tends to get pushed to the back burner. The older that we get, the more money that we spend at the doctor and on our health care needs. As a senior, the largest part of health care insurance is Medicare. The government program has provided health care coverage to millions and millions of people across the United States. For a lot of these seniors, they wouldn’t be able to afford this protection if they applied for a policy through a private company.
The problem is that Medicare doesn’t cover everything that seniors may run into as they get older. Those coverage gaps could leave you with a mountain of hospital bills and medical fees. Those bills could quickly drain a retirement account and leave seniors with too little money in their retirement age.
Luckily, there are several ways that you can get some additional coverage against rising medical bills. It’s vital that you have the health care coverage that you need. One of the best ways to do that is to purchase a Medigap policy.
What is a Medicare Supplemental Plan?
These Medigap plans are sold by private insurance companies and are separate from the government Medicare program. The goal of these plans is to fill in the gaps that Medicare leaves behind. If you have one of these plans, then you’ll still be required to pay the premiums for Plan A and B, and you’ll also pay a private insurance company every month for the additional coverage. Some Medicare enrollees assume that these Medigap plans replace original Medicare, but that is not true.
There are ten different supplemental plans that you can choose from, depending on where you live. Not every state allows all the plans. These plans are denoted by a letter of the alphabet, from A to N. The different plans are going to cover different expenses or a portion of expenses. Some of them are going to provide more comprehensive coverage, like Plan F, while others are going to be more basic, like a Plan A. #ap71886-ww
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What Does Medigap Plan K Cover?
Now that we’ve looked at the foundational information of supplemental plans let’s take a deeper look at Medigap Plan K. For a lot of applicants, Plan K is a great policy, but it’s important that you compare all of your options before you decide which one is going to work best for you. Plan K is not the most popular option, but there are several advantages of this plan that you should be aware of when you’re shopping for additional coverage.
Plan K is one of the smaller policies that is going to provide basic coverage (which means lower monthly premiums). Unlike other plans that pay 100% of categories, Plan K is only going to pay for a portion of those expenses. For most of the categories, it pays 50% of these expenses. I’ll discuss those categories later in this article.
One of the unique advantages of Plan K is the yearly out-of-pocket limit that it includes. With Plan K, the out-of-pocket limit is $5,120, but that number can change every year. Once you’ve reached this threshold, your Medigap plan is going to cover 100% of your Medicare-covered costs for the remainder of the year. This is a nice safety net to have for your supplemental coverage, especially if you have a drastic health condition that could rack up a massive amount of health care costs. Plan K is only one of two plans that have an out-of-pocket limit, the other plan is Plan L, which has a much lower limit. With Plan L, the limit is half of Plan K’s limit.
If you purchase a Plan K, you’re going to get 50% coverage for these categories:
Medicare Part A deductible
Part A hospice care coinsurance or copayment
Skilled nursing facility coinsurance
Part B copayment or coinsurance
First three pints of blood for medical procedures
Until you reach the out-of-pocket limit, you will have to pay half of all of the categories. For most people, 50% coverage is enough to give them the financial protection that they need, but for others, they would like to have those expenses completely coverage. This is one of the most unique traits about the Plan K, is that it only pays for half of the categories.
These are the main coverage categories for your Plan K. There are a few key areas that you won’t get any coverage at all. The two main ones are the Part B deductible (which no plans are allowed to pay for anymore) and the Part B excess charges.
When you go to the doctor or have any medical services done, there is a pre-determined amount that they are going to pay for those treatments. Legally, the doctor is allowed to charge 15% more than that pre-determined amount, and everything above that is considered excess charges. With a Plan K, you’ll be responsible for paying for all of those excess charges out-of-pocket. In most cases, these are not going to be huge bills, but depending on the treatments or services that you get, it could end up draining your bank account before you know it.
Choosing the Plan That Works Best for You
Is a Plan K right for you? Plan K is a specific Medigap plan that scares a lot of applicants away. The half coverage keeps a lot of Medicare enrollees from choosing this plan, even though they could save money by picking this plan. If you don’t think a Plan K is best for you, there are several other excellent options that you can choose from. I know that picking a plan can be difficult, but there are several key factors that you should look at when you’re shopping for supplemental coverage.
The first thing that you should look at is your finances. The goal of your Medigap plan is to protect your savings account from being hit with thousands and thousands of dollars of medical bills, but you shouldn’t have a plan that’s going to stretch your budget every month. Before you apply for any of these plans, take a long hard look at your finances and see which one is going to fit comfortably.
The next thing that you should consider is your health. The purpose of your Medigap plan is to ensure that you’re getting the proper health care coverage without having to foot that bill yourself. If you’re in excellent health with no serious health complications, then you can consider purchasing a smaller plan, like a Plan K, which leaves more gaps in your coverage. On the other hand, if you’re in poor health and have several red flags on your medical history, then you should consider enrolling in a more encompassing plan that fills in all of the gaps left behind by Medicare.
Medigap Open Enrollment Period
Once you’ve decided which plan that you want to buy, Plan K or one of the nine others, it’s important that you take advantage of your Medigap Open Enrolment Period. This is a six-month window that starts the month that you turn 65. During this window, the insurance company can’t decline your application, regardless of your health or any pre-existing conditions that you may have. If you have some drastic health problems, this could be your only chance to get supplemental coverage.
If you apply during your Medigap Open Enrollment period, the insurance company can’t increase your premiums before of your health. If you purchase one of these plans outside of the open enrollment date, then your application will have to go through the underwriting process. That means that you could get drastically higher rates for your supplemental coverage. If you want to save money, it’s important that you apply during this time frame.
If you’ve already missed your Medigap Open Enrollment date, don’t worry, there is still a good chance that you can get affordable supplemental coverage.
Questions or Concerns?
This is the basics of Plan K coverage. If you still have questions about Plan K or supplemental coverage in general, please feel free to contact me or an experienced Medigap insurance agent today. Your health care coverage is one of the most important factors, especially as you get older.
It can be difficult keeping up with all of the changes to Medicare and supplemental coverage, but that’s why I am here to help. It’s my goal to give you the information and resources that you need.
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