An Overview of Filial Responsibility Laws

Taking care of aging parents is something you may need to plan for, especially if you think one or both of them might need long-term care. One thing you may not know is that some states have filial responsibility laws … Continue reading →

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8 Essential Rules for Surviving Financial Hardship

At some point, most people experience an unexpected crisis that shakes their financial world. It could be losing a job, receiving a huge medical bill, or having a car break down at the worst possible time. But surviving a pandemic is a situation you probably never thought you would face.

No matter what challenge you’re facing, you’re not the first.

Along with the public health toll, the COVID crisis has put millions of people out of work. For those struggling financially, here are eight critical rules to help you manage money wisely, stretch your resources, and bounce back from this unprecedented health and economic disaster.

8 rules for managing a financial hardship

Here are the details about each rule to manage a financial setback during the coronavirus crisis.

Rule #1: Accept your situation and use your resources to seek help

The key to successfully navigating a financial setback is to be realistic. If you’re in denial and don’t face money troubles head-on, you can quickly compound the damage.

Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions. Start talking about your challenges with people and professionals you trust, such as a money-savvy family member, financial advisor, legitimate credit counselor, or an attorney.

Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions.

The following financial associations have certified volunteers who can offer free help and advice:

  • National Association of Personal Financial Advisors
  • The Financial Planning Association
  • Association for Financial Counseling & Planning Education

Rule #2: Get a bird’s eye view of your finances

To fully understand your situation, create a list of what you own and owe; this is called a net worth statement. Compiling your data in one place helps you evaluate your financial resources, make decisions more efficiently, and have essential information at your fingertips if creditors or advisors ask for it.

First, list your assets: 

  • Cash
  • Investments
  • Retirement accounts
  • Real estate
  • Vehicles 

Then list your liabilities:

  • Mortgage
  • Car loans
  • Student loans
  • Credit card debt

Include the estimated values of your assets, the balances on your debts, and the interest rates you pay for each liability. You could jot down this information on paper, enter it in a computer spreadsheet, or create a report using money management software.

When you subtract your total liabilities from your total assets, you’ve calculated your net worth, which is an indicator of your financial health. It’s not uncommon to have a low or negative net worth when you’re in financial trouble.

RELATED: 10 Things Student Loan Borrowers Should Know About Coronavirus Relief  

Rule #3: Understand your cash flow

An essential part of bouncing back from a financial crisis is keeping an eye on your monthly income and expenses. Create a cash flow statement that lists your expected income and typical expenses, such as rent, utilities, food, prescriptions, transportation, and insurance. Again, you can create this report manually or by using budgeting features in a financial program.

Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending.

Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending. Making temporary sacrifices will help you recover as quickly as possible with less long-term damage to your finances.

Rule #4: Shop your essential expenses

As you review your spending, it’s an excellent time to comparison-shop your essential expenses. Evaluate your highest costs first, such as housing, vehicles, and insurance, since they offer the most significant potential savings.

For instance, you may be able to move into a less expensive home, purchase or lease a cheaper vehicle, and shop your auto insurance to find better deals. Ask your utility provider about assistance programs that offer energy-saving improvements at no charge.

Rule #5: Communicate with your creditors

If you haven’t been in contact with your creditors, start a dialog with each one immediately. You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles. Ask them for solutions, such as deferring payments for several months, setting up a reduced payment plan, or refinancing a loan to reduce your financial burden.

You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles.

Creditors are likely to ask about details regarding your financial situation, so have your net worth and cash flow statements on hand when you speak to them. Be ready to complete any required assistance applications quickly.

Rule #6: Prioritize your debts carefully

Based on guidance from creditors and finance professionals, prioritize your bills and debts carefully. Your goal should be to conserve as much cash as possible without skipping essential payments. Always pay for necessities first: food, prescription drugs, and auto insurance.

Debts related to child support and legal judgments have severe consequences and should be prioritized

Use your net worth statement to rank your liabilities from highest to lowest priority. For instance, debts related to child support and legal judgments have severe consequences and should be prioritized. Keeping up with an auto loan is a high priority if you rely on your vehicle for transportation. Federal student loans are in automatic forbearance through September 30, and the relief may get extended through 2020.

Your unsecured debts—medical bills, credit cards, and private student loans—are lower priorities. Never pay these debts ahead of rent, a mortgage, or utilities when you have a cash shortage.

Rule #7: Don’t let collectors force you to make bad decisions

Prioritizing your debts means some may be paid late or not at all. If a debt collector contacts you about a low-priority debt, such as a medical bill or credit card, don’t allow them to persuade you to pay it before your highest priority bills.

Collectors may try various aggressive tactics, such as threatening to sue you or ruin your credit. A lawsuit could take years, and a creditor is more likely to negotiate a settlement with you. Remember that a creditor or collector can’t send you to jail for civil debts.

If you are behind on bills, that fact is likely already reflected on your credit reports. By the time a collector contacts you, the damage is already done, and paying the bill won’t improve your credit in the short-term.

Rule #8: Take advantage of local and federal benefits

If your income and savings have entirely dried up, use these resources to learn more about local and federal benefits.

  • FeedingAmerica.org has a map showing local food banks
  • Supplemental Nutrition Assistance Program (SNAP) is the federal food program you may qualify for based on where you live, your income, and family size
  • MakingHomeAffordable.gov can help you find a housing counselor or see if your mortgage is backed by the federal government and qualifies for forbearance
  • Benefits.gov has a questionnaire that helps you discover the benefits you’re eligible for
  • Medicaid.gov is the federal health insurance program you may qualify for based on where you live, your income, and family size
  • Healthcare.gov is the federal health insurance marketplace where you may find plans with substantial subsidies if you earn too much to qualify for Medicaid

Financial challenges can cause you and your family to experience a flood of emotions, including anger, fear, and embarrassment. As difficult as it might be to put a financial crisis into perspective, it’s critical. No matter what challenge you’re facing, you’re not the first. There are millions of people who are dealing with COVID-related financial hardships.

Face the fact that your recovery could take a while. Do everything in your power to manage your budget wisely by getting organized, seeking ways to earn more, and spending less. Don’t be afraid to ask for help from creditors, seek free advice from professionals, and take advantage of every local and federal benefit possible.

6 Tips to Find Affordable Health Insurance When You Become Self-Employed

If you're dreaming about leaving a corporate job to work for yourself, getting affordable health insurance is probably one of your top concerns. Fortunately, there are more protections now than ever for those who leave the safety of a group health plan.

This post will cover six tips to find affordable health insurance when you become self-employed or leave a job for any reason, so you and your family get the coverage you need.

Major benefits of the Affordable Care Act (ACA)

The Affordable Care Act (ACA), known as Obamacare, became law in 2010, with significant provisions taking effect in 2014. One critical ACA benefit is that you can't be denied coverage or charged sky-high premiums when you have a preexisting medical condition. However, insurers can charge different rates based on where you live, your age, tobacco use, and family size.

One critical ACA benefit is that you can't be denied coverage or charged sky-high premiums when you have a preexisting medical condition.

The ACA also removes annual and lifetime caps on your health coverage. And no matter how much care you receive, the law caps how much you have to pay for it.

Out-of-pocket annual maximums vary depending on your health plan, but if you get in-network care, you'll never have to pay more than $8,150 as an individual, or $16,300 as a family, for the 2020 plan year. For 2021, these amounts increase to $8,550 and $17,100. Note that these limits don't include your monthly premiums.

What is the Affordable Care Act (ACA) Subsidy?

The ACA also offers many low- and middle-income Americans a health subsidy, which cuts the cost of premiums depending on your income and family size. It's a tax credit paid to your health insurance provider every month, which allows you to pay a lower premium.

For 2020, an individual earning approximately less than $51,000 or a family of four making under $104,000 per year may qualify for an insurance subsidy.

The ACA subsidy applies when your household income is between 100% and 400% of your state's federal poverty level. For 2020, an individual earning approximately less than $51,000 or a family of four making under $104,000 per year may qualify for an insurance subsidy. 

One challenge to using a subsidy is that it's based on your estimated earnings in the year when you'll get coverage, not on your last year's income. Since self-employment incomes can vary dramatically from month to month, the chances of knowing exactly how much you'll earn in the current or future year may be difficult. 

If you underestimate your income for a health subsidy, you may have to return a portion of the tax credit already spent on your insurance during the previous year. In other words, you may owe additional taxes that you weren't expecting.

When you enroll in an ACA plan, you'll have access to a marketplace account. That's where you can update changes to your expected income or family size that affect your tax credit so you can correct it as quickly as possible.

What is the Affordable Care Act (ACA) Mandate?

The ACA mandated that individuals be covered by a qualified health plan or pay a tax penalty if you're uninsured for more than two consecutive months. The mandate applies no matter if you're employed, self-employed, unemployed, a child, an adult, or where you live. 

Technically, it's still illegal to be uninsured, but the federal government won't penalize you for it.

However, starting in 2019, due to the Tax Cuts and Jobs Act, the mandate penalty for not having health insurance no longer applies. Technically, it's still illegal to be uninsured, but the federal government won't penalize you for it. 

But several states have their own insurance mandates, requiring you to have a qualifying health plan. You may have to pay the penalty for being uninsured if you live in:

  • California
  • District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont

For example, California residents without ACA coverage in 2020 face a penalty up to 2.5% of household income, or $696 per adult, and $375.50 per child, whichever is greater. So, even if the federal government won't penalize you for being uninsured, you could have to pay a hefty state penalty, depending on where you live. More states will likely adopt penalties to keep the cost of coverage for residents as low as possible.

The ACA established health insurance exchanges, primarily as online marketplaces, administered by either federal or state governments. That's where individuals, the self-employed, and small businesses can shop and purchase qualified insurance plans and find other options, depending on your income.

How to get affordable health insurance

When you go out on your own, the cost of a health plan can be shocking—especially if you just left a company that paid a big chunk of the insurance bill on your behalf.

Remember that the high cost of health insurance pales when compared to the alternative. Having a medical emergency or being diagnosed with a severe illness that you can't afford to treat could be devastating. 

Remember that the high cost of health insurance pales when compared to the alternative.

Here are six tips for finding affordable health insurance when you become self-employed or no longer have job-based coverage for any reason:

1. Join a spouse or partner's plan

If your spouse or partner has employer-sponsored health insurance, joining their plan could be your most affordable option. Group insurance generally costs much less than individual coverage. Plus, some employers subsidize a portion of your premium as a benefit. 

However, some employer plans may not offer domestic partner benefits to unmarried couples. So, find out from the benefits administrator what's allowed. 

If you're under age 26, another option is to join or remain on a parent's health plan if they're willing to have you. Even if you're married, not living with your parents, and not financially dependent on them, the ACA allows you to get health insurance using a parent's plan. However, once you're over age 26, you'll have to use another option covered here.

2. Enroll in a federal or state marketplace plan

As I mentioned, the ACA established federal and state marketplaces for consumers who don't have access to employer-sponsored health insurance. The following states have health insurance exchanges:

  • California
  • Colorado 
  • Connecticut 
  • District of Columbia
  • Idaho 
  • Maryland 
  • Massachusetts
  • Minnesota
  • Nevada
  • New York 
  • Rhode Island
  • Vermont
  • Washington

No matter where you live, you can begin shopping for an ACA-qualified health plan at healthcare.gov. However, you can only apply for a policy during the annual open enrollment period—November 1 to December 15, for coverage that will begin on January 1 of the following year. Some states with healthcare exchanges have an extended enrollment period

In general, if you miss the enrollment window, you can't get an ACA health plan until the following year unless you qualify for a special enrollment. That allows you to purchase or change coverage any time of the year if you have a major qualifying life event, such as losing insurance at work, getting married or divorced, having a child, or relocating. However, you typically only have 60 days after the event occurs to enroll.

If your income is too high to qualify for a healthcare subsidy, you can still buy health insurance through the federal or your state's exchange. You can also get an ACA-qualified health plan directly from an insurance company, a health insurance agent or broker, or an online insurance aggregator.

3. Consider a high-deductible health plan (HDHP)

One way to reduce the cost of health insurance premiums is to choose a high-deductible health plan (HDHP). You enjoy lower monthly premiums but have higher out-of-pocket costs. If you're in relatively good health, an HDHP can make sense; however, if you get sick, it can end up costing you more. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

Another benefit of having an HDHP is that you qualify for a health savings account (HSA). Contributions to an HSA are tax-deductible and can be withdrawn at any time to pay for qualified medical expenses, such as doctor co-pays, prescription drugs, dental care, chiropractic, prescription eyeglasses, and mental health care. 

Paying for a broad range of HSA-eligible medical, dental, mental, and vision costs on a tax-free basis can add up to massive savings!

4. Get a short-term plan

If you miss the deadline to enroll in an ACA health plan and don't qualify for special enrollment, are you simply out of luck? Fortunately, no. You can purchase a short-term health plan until the next enrollment period comes around.

The problem is, short-term plans don't have to meet ACA standards and only offer temporary coverage, such as for a few months or up to a year. You may be eligible to renew a plan for up to three years in some states, depending on the insurer. 

You won't find short-term plans on the federal or state exchange, and therefore can't get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan.

Short-term plans can charge more if you have preexisting conditions, put caps on benefits, or not cover essential services like prescriptions and preventive care. Because they fall short of ACA requirements, you can have one and still be subject to a state-mandated health penalty. 

You won't find short-term plans on the federal or state exchange, and therefore can't get a subsidy when you purchase one. However, they can be less expensive than an ACA-qualified plan. 

Having short-term coverage is certainly better than being uninsured, but I recommend replacing it with qualified health coverage as soon as possible. That's the best way to have the protection you need against the enormous financial risk of medical costs. 

5. Enroll in Medicaid and CHIP (Children's Health Insurance Program)

If you can't afford health insurance, you may be eligible for free or low-cost coverage through Medicaid or CHIP at any time of year, depending on your income, family size, and the state where you live. In general, if you earn less than the poverty level, which is currently $12,760 for an individual or $26,200 for a family of four, you may qualify for these programs. They may have different names depending on where you live. 

Unlike ACA health plans, state-run health programs don't have set open enrollment periods, so if you qualify, coverage can begin any time of year. 

When you complete an application at the federal or state health insurance exchange, you can also determine if you qualify for coverage through Medicaid and CHIP programs. You can learn more about both programs at medicaid.gov

6. Get COBRA coverage

If you leave a job with group health insurance, you can enroll in COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage. It isn't an insurance company or a health plan, but a regulation that gives you the option to continue your employer-sponsored health insurance after you're no longer employed. 

Instead of having your plan canceled the month you leave a job, you can use COBRA to continue getting the same benefits and choices you had before you left the company. In most cases, you can get COBRA benefits for up to 18 months.

The problem with COBRA coverage is that it's temporary and can be expensive. Unlike other federal benefits, such as the Family and Medical Leave Act (FMLA), employers don't have to pay for COBRA. You typically have to pay the full cost of premiums, plus a 2 percent administrative charge, to the insurer. 

If you're not eligible for regular, federal COBRA, many states offer similar programs, called Mini COBRA. To learn more, check with your state's department of insurance.

Health insurance shopping tips

After you become self-employed and purchase health insurance, it's crucial to shop for plans every open enrollment period. Your or your family's medical needs or income may change.

Additionally, new health insurers come in and go out of the health insurance marketplace. Carriers that offered plans in your ZIP code last year may not be the same set of players this year. In other words, a competitor could offer a similar or better plan than yours, for a lower price. So, if you don't shop annually, you could leave money on the table.

A Quick Guide to the Difference Between Medicaid & Medicare

Medicare and Medicaid may sound alike, but these government health insurance programs are dramatically different from one another. Here’s a brief overview. What Is Medicare? Administered by the federal government, Medicare is a health insurance program primarily for adults who are 65 years of age or older and have paid into the Social Security system for… Read More

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What Long-Term Care Insurance Covers

While Medicare and Medicaid both help aging adults afford some of their medical expenses, they may not cover the cost of an extended illness or disability. That’s where long-term care insurance comes into play. Long-term care insurance helps policyholders pay … Continue reading →

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