Use Coupons for Car Rental Discounts But Read the Fine Print Carefully and Exceptions

Full coverage auto insurance is most commonly defined as an insurance policy that exceeds the state minimum requirements and includes comprehensive, collision, property damage and medical overages.

Car Rental insurance is usually a daily charge and can drive the cost of your car rental way up. Most people turn it down and assume they are covered by their personal auto policy and additionally by credit cards but few take the time to call and verify the coverage.

Many money saving blogs caution that you may not be covered for everything even if you have full coverage auto insurance.
The quickest way to find out is to call your agent and credit card company and ask.

The car rental company will pressure you to buy the insurance and chances are you will be in a hurry. So it is best to know the answers in advance. Just so you know what is going on when you get to the car rental counter let us look at what rental car companies are actually selling you in terms of insurance:

1. Collision Damage Waiver (aka Loss Damage waiver) : This is not an actual insurance. It waives the right for a rental car company to get money from you if the vehicle is damaged or stolen as long as you don’t violate any of the terms of your rental agreement. If you have collision and comprehensive coverage in your auto policy, you should be covered so you really shouldn’t buy this one.

2. Liability Insurance : Covers any liabilities you may have in case of an accident. Your auto liability insurance should cover you here.

3. Personal Accident Insurance (PAI) : This provides coverage for accidental death and medical expenses for the renter and passengers. If you have accident coverage in your personal policy you are covered plus your medical insurance may cover the gap if your auto policy limit is low.

4. Personal Effects Coverage (PEC) : This covers the your personal belongings. This coverage is either in your auto or homeowners policy.

Secondary coverage from Credit Cards : Most of the major credit cards offer the Collision Damage waiver. It is a usually a secondary coverage meaning they will pay what your insurance won’t (ex. deductible) The credit cards may also pay some fees that are not usually paid by the auto insurance.

Be careful if you use coupons because you might not be covered at all. For instance, American Express says unless you use American Express discount coupons your coverage is void!

If you actually have an accident the car rental company may charge additional fees that will not be covered by your auto insurance. Here are the categories of fees:

Loss of use fees – They charge for the lost revenue while the rental car is in the shop being fixed.

Administrative fees – They charge you a fee just because it takes employee time to do the paperwork.

Diminution of values fees – Because the car has been in an accident its value will decrease.

According to money blogger these 3 fees themselves can range from $1000 to $10000. Your auto insurance policy may or may not cover these.

Roadside Assistance is another area where you are usually under pressure to make a decision and that pressure can cause you to spend more money than you should. See our post Roadside Assistance for Paying Reasonable Towing Charges if Your Car is Disabled to find out what you need to know before your car is disabled.

Personal Umbrella Insurance Rates

One way you can lower the total cost of all your insurance policies is to take out an umbrella policy. Many people are not even aware umbrella policies exist or if they do know about them, think they are only for wealthy people.

Umbrella insurance policies provide additional liability insurance for claims exceeding your existing automobile or homeowner’s insurance policies, are most commonly bought by wealthy individuals with substantial assets to protect but they can be used by the frugal to get more insurance for less money.

Here is how you can do it. You buy an umbrella policy, which provides additional liability coverage, then you can lower your liability coverage on all of your other policies to the minimum required by the umbrella policy, and then use the umbrella policy to pick up the difference. This is especially important for families with teenagers. To save more money on auto insurance see our post Cheap Auto Insurance Rates

On average insurance companies want policyholders to have at least $250,000 in liability insurance on an auto policy and $300,000 in liability insurance on a homeowners’ policy before authorizing an umbrella liability policy for $1 million in additional coverage.

Umbrella insurance is sold in $1 million increments and costs on average between $150 to $300 a year for the first $1 million in additional coverage. The next million will usually costs about $75 annually and about $50 for every million after that. So it works out to about $15 to $25.00 per month. Consider asking your agent to run the numbers for you and see if there aren’t some savings in your total cost of insurance.

Insurance experts advise considering an umbrella policy if you own a home, or condominium with a pool or trampoline, if you own a dog or have have teenage drivers.

The process works a little differently when applying for a policy. With auto and homeowners policies, the insurance agent who writes the policy has binding authority. But with umbrella policies, the completed application must be submitted to the company for approval.

Umbrella policies are fairly cheap as far as insurance goes but offer a great deal of protection and just plain simple peace of mind.

Traditional IRA and Roth IRA

Planning for an early retirement is different than planning for retirement at 65. Obviously the money will have to last much longer but what are the other important financial issues for early retirees?

Investment strategy – Your investments need to be more conservative than what is typical for your age group. While aggressive investing might make more money in the long run, you can’t afford those short term dips. Aggressive investors planning on retiring at 65 can wait a few years for the market to come back but if you want to retire in a few years you need your money accumulating a steady rate with little risk of losing a large percentage of your capital. Early retiree bloggers recommend going with conservative dividend-paying stocks using lower risk asset allocation strategies like the “permanent portfolio.”

Use of retirement savings – A good portion of your savings might be tied up until you’re 59 ½. Retirement plans weren’t designed for people retiring at 35. You should still contribute to your 401(k) though because they accumulate tax free and when you are eligible to tap into them you will be in a lower tax bracket. Early retirement experts do say that if you want to make withdrawals from your retirement accounts but want to minimize the cost, you can start converting your pre-tax accounts to Roth IRAs once you stop working. There is a tax on the conversion but by spacing the conversions out over time, you can keep the tax rates low. After 5 years, you can start withdrawing the converted amounts from your Roth IRA without tax or penalty.

Social Security Payment – Early retirees really can’t count much on Social Security. Because the length of time you work and contribute to Social Security is shorter than those who work until retirement age, your benefits will be less.

Health Insurance = It will be quite awhile until Medicare kicks in and until then you will have to provide your own health insurance. If you have pre=existing medical conditions you will still be able to get insurance because of the new health care laws. Also, with your lower post retirement income you may be eligible for a premium subsidy. To learn more about options for health insurance for early retirees see our post Health Insurance for Early Retirees

Managing Your Nest Egg - Your money will need to last much longer than normal retirees. The typical retirement calculations will not be appropriate for you since you will spend many more years in retirement. Annuities will be less attractive too because your young age and long life expectancy mean much lower payments. Your nest egg will have to grow more than you withdraw each year to minimize the need to touch your principal. Early retirement bloggers suggest investing in high-dividend paying stocks yielding 3-4% income and live off the dividend income. Dividends tend to be much more stable than stock prices and generally rise faster than inflation.

One thing that people often forget is that retirement income under some plans is fixed and inflation can eat away at a fixed income. If the past is any indication, inflation will be a factor you will have to face.

As you can see retiring at 30 requires a very different investment strategy than retiring at 65. Early retirees must also plan for their health insurance coverage. One thing all retirement advisers agree on is planning is the key. Do your research, be aware of all the factors and plan accordingly.

Early Retirement Blogs

One of major challenges for early retirees is figuring out how to get enough money saved to meet their living expenses before they become eligible for retirement plan distributions and Social Security checks.

The government says you have to be at least 62 to begin collecting Social Security. In most cases you can’t take money out of your 401(k) and other retirement accounts until age 59½ without incurring a penalty.

There are a few exceptions. The Internal Revenue Service will waive the 10 percent penalty for early 401(k) withdrawals if you “separated from service,” or leave your job during or after the calendar year in which you turn 55.

Also, the penalty is also waived if you agree to make withdrawals of substantially equal payments after you leave your job. These withdrawals must be made at least once a year. Except in cases of death or disability, the payments under this exception must continue for at least five years or until the retirement account owner reaches age 59½, whichever is longer.

Most retirement experts do not advise taking money from your retirement accounts. You get a kind of double penalty when you do this. Your retirement savings won’t be as much when you retire and the money you take out can not continue to earn interest.

Additionally, most retirement blogs warn you away from using social security before your full retirement age because you receive a permanently reduced benefit. For example, if you were born between 1943 and 1954, for example, your full retirement age is 66. You would receive 75 percent of your full benefit if you start collecting those checks at age 62.

So you must use money from other sources to pay for living expenses before your retirement benefits kick in. One early retirement blogger calling himself Mr. Money Mustache says it is very simple to figure out how to get your money for living expenses. He says figure your savings rate, as a percentage of your take-home pay.

For example, if you save a reasonable percentage of your take-home pay, like 50%, and live on the remaining 50%, you’ll be ready to
retire in about 16 years. This assumes you can earn 5% investment returns after inflation during your saving years and you will live off the ”4% safe withdrawal rate” after retirement.

The interesting point he makes is that cutting your expenses is much more effective in boosting your savings than increasing your income. Again you are looking a kind of double reaction. My Money Mustache says “It increases the amount of money you have left over to save each month and it permanently decreases the amount you’ll need every month for the rest of your life.”

In other words learning to live frugally is really the key to being able to retire early. Getting a handle on your spending is crucial. It is really a psychological issue much more than being disciplined about savings. You have to see your refraining from spending as a path to financial freedom. You don’t want to spend so little you feel deprived but you want to find a happy medium that you can live with.

Health insurance is a big issue too for early retirees. We have done a lot research on what is available. See our postCOBRA for Early Retirees

Best Way to Retire Early

If you or a member of your family has a “pre-existing condition”, consider COBRA and when COBRA runs out HIPPA makes sure you can find insurance.

COBRA lets you keep your benefits for 18 months if you pay the cost. Your employer may charge you 102% of his total health premium cost. (The extra 2% covers administrative costs.) So if the coverage you had cost your employer $200 per month, you could extend that coverage for 18 months at a cost of $204 per month. .

After COBRA runs out the Health Insurance Portability and Accountability Act of 1996 (commonly known as the Kennedy-Kasenbaum bill) lets you get an individual (i.e., non-Group) health insurance policy for yourself and your dependents without restrictions on “pre-existing conditions.”

NOTE: To qualify for Kennedy-Kasenbaum coverage, you can’t have any gaps in your health insurance. Make sure you pay your health premiums on time. If you have a break in your coverage of 63 days or longer, it makes you ineligible. The 63 day period also applies between the end of your COBRA coverage and the start of your individual coverage.

While Congress has guaranteed you can get insurance, it hasn’t mandated what you should pay for it. The Kennedy-Kasenbaum bill allowed the states some leeway in implementing the legislation. If a state legislature couldn’t agree on how to provide coverage, the Kennedy-Kasenbaum law provides a “Federal fallback” position

States that have taken a position on the issue fall into three camps: “high-risk pools,” “guaranteed issue” insurance, and “Federal fallback.”

The “high risk pools” place people with pre-existing conditions in a separate, often state subsidized pool. The premiums are high as much as 50% to 200% higher than insurance for “regular” people and the coverage may be less.

Several states, many in the Northeast, have “guaranteed issue” laws that require insurers in the individual market to offer coverage regardless of a person’s health. The individual insurance rates in these states are often higher to absorb the cost of people with pre-existing conditions.

The “Federal fallback” position requires that insurers in a state offer people exhausting their COBRA benefits the choice of the two most popular health insurance policies offered by that insurer.

Call the State Insurance Commissioner’s office to find out how your state or other states you might want to move to are implementing the Kennedy-Kasenbaum law.

Best Way to Retire Early

Even if you’ve done the math and the answer points to you retiring early, health insurance is the one thing that could stop you cold. Even those not planning to retire early can have problems getting reasonably priced health insurance.

If you have never had to provide your own health insurance you are in for some “sticker” shock. That’s because most employers subsidize the cost of health insurance. For example, it typically costs between $200-300 per month for comprehensive health insurance for a single person. An employer might charge workers $30-40 per month for the coverage, absorbing the balance of the cost.

Some retirement blogs say to take the money you would spend for premiums and set it aside for your health care expenses. Retirement experts say though this is not a financially sound idea. If you self insure, you end up buying your health care at retail prices and you might need as much as $100,000 or more as a reserve for medical expenses. Self insuring exposes your retirement nest egg to too much risk.

So what is the best option?

Take the COBRA – Under Federal law, when you leave a company you are allowed to continue your employer provided health benefits (medical and dental) for 18 months if you pay the cost. These are commonly referred to as COBRA benefits. See our post COBRA for Early Retirees

Buy a high deductible health insurance policy – You can insure a family of four for less than $100 per month with a $10,000 per year deductible. If you can set aside the $10,000 and are pretty sure your family’s medical expenses will be minimal, this is an effective strategy.

Live in a foreign country – Countries with socialized medicine are what you will looking for. Comprehensive health insurance in these countries is a fraction of the cost of similar coverage in the United States.

Shift your assets away – An estate planner can help you appear indigent in terms of assets. You will qualify for free health care i.e. Medicaid but be aware many physicians do not accept Medicaid and finding one that does can be difficult and frustrating.

Consider a non-profit HMO, if one is available – Non-profit HMOs like Kaiser-Permanente often have lower premiums and better coverage than for profit insurers like Aetna and CIGNA.

Take course at your local university – You may be able to get low-cost comprehensive health insurance from a college or university. You may only need to take one or two courses.

Whichever way you go make sure you have the health insurance issue figured out before you retire. Get whatever documents you need and make sure you understand how everything is going to work. You want to minimize your risk exposure when you retire and getting the right health insurance can make a big difference.

Interest Bearing Credit Union Checking Accounts

Banks scrambling to make up for lost revenue are constantly trying to put new fees in place to make up for the lost monies. You can get hit with a fee as much as $50 a month if you do not maintain minimum balances or meet other requirements for certain high-end checking and savings accounts.

Cheapskate bloggers recommend looking at credit unions. While not all credit unions offer free accounts, many still do. I thought you had to be a member of whatever organization the credit union represented but apparently anyone can join. Several blogs talked about Firstmark Credit Union (www.firstmarkcu.org).

Firstmark is located in Texas, but anyone can join regardless of where they live or work.

Customers who use their debit card earn 10 cents for every signature-based debit-card transaction.

You can also earn $25 bonuses by receiving statements online, using their debit card, paying one bill with online bill pay and signing up for direct deposit.

Do all four (use promo code GET100) and you can have $100 added to your balance.

Plus Firstmark’s free checking account pays 0.10 percent APY on your balance and your checks are free.

Firstmark has 11 local branches in the San Antonio area, but anyone can join online. Go to www.FirstMarkCU.org, and click on “Open a Free Checking Account.” On the next page, look for “Become a Member.” In that list, select “Other Eligible Groups.” Use the pulldown menu and select “None of the above.”.

Once you are a credit union member, you do not have to do anything to keep your membership. They have a policy “Once a Member, Always a Member.”

Firstmark is part of the Allpoint network, which provides its members free use of 35,000 ATMs nationwide and 43,000 around the world.

All of the ATMs in 7-Eleven, Target, Walgreens and Costco, for example, belong to Allpoint.

I also found a site called Find A Better Bank.com. They help consumers find new banks and enable them to switch fast. They do the research to maintain information about banks and credit unions and their checking accounts. Find a Better Bank gets the instructions and forms for you to make switching banks easier.

Banks get market research from this site and find out why their customers are leaving.

You don’t have to put up with excess banking fees. As you can see there are lots of banks and credit unions who would like your business and won’t make you pay for it. For more help with finding a Cheapskate Bank How to Avoid Rising Bank Fees

Frugal Simple Living

1. Stop thinking of frugal living as depriving yourself – People who live in a frugal way enjoy the things that are most important to them. A frugal person spends money on things because they enjoy them not because they need to “keep up the Jonses.” Frugal people think independently and don’t have to run out and buy the latest thing. Most importantly frugal people value their freedom. They choose how they live because they are not prisoners of their spending.

2. Find other frugal people and learn from them – There are tons of frugal living blogs with great ideas that you may not know about.

3. Avoid credit care debt – You cannot get by without a credit card in this world. You need them to secure hotel reservations, car rentals, and myriad of other situations. So I am not advocating get rid of all your credit cards. The problem is they can make it too easy to buy things – removing you from seeing how much money you are actually spending. So keep one or two for emergencies and for when the vendor won’t except any other form of payment otherwise pay cash.

4. Eat well – Good food is one of the cheapest ways to prevent health problems. Homemade food has fresher ingredients, less sodium and is way cheaper than pre-packaged food or fast food. Once you start making meals at home you will develop a repertoire of recipes you can rely on and it won’t seem to take so much time.

5. Exercise - A regular exercise program is another way to protect your health. There are countless studies which prove the benefit of daily exercise. If you want to know just how much you will save, take a look at the cost of long term care insurance. One look at those numbers and you won’t want to be a couch potato anymore.

6. Building up a $10,000 Emergency Fund – Having a hefty emergency fund is critical to your financial and mental health. Scary stuff happens but it is not so scary when you have a cushion to shield you. With an emergency fund in place, you don’t have to worry so much and you really can enjoy your life more.

7. Invest 20% of Income – Saving and investing your money wisely is a big part of being frugal. Having money automatically taken out of your paycheck is a great way to do it. You never see the money in the first place so you don’t miss it so much. If your employer has some kind of matching plan, try to contribute as much as you can. If you can’t do 20%, start somewhere even it is just 2% or 5%, start investing now because compound interest is powerful.

8. Create Multiple Streams of Income – With salaries freezing, skyrocketing inflation, and our economy poking along we all could use some extra income.

Many people have a hobby they turn into a second income. The internet also has many opportunities for people to earn a second income. Most bloggers out there including yours truly, blog because they enjoy it but also because there is money to be made.

If you are planning to retire early, getting a second income stream in place is a good way to ensure early retirement is a reality.

9. Scrutinize non essential fixed expenses – Premium Cable TV is a big expense many people have but may not really use. Think about all the things you subscribe to and see if you are really making use of them.

10. Change the way you think about shopping – Evaluate each purchase before you make it. Why are you buying it? Do you need it? Just taking this little pause before you purchase can save you a great deal of money. Often when you really think about it you probably don’t really need the item. You may have something already at home you can use or can maybe even borrow it from a neighbor.

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Early Retirement Blogs

Could you be an extreme retiree? Who are the extreme retirees? Surprisingly, extreme early retirees are a divers e group. They run the gamut from young parents to singles and dual-income couples without children. They share an excitement about their lives, a desire to spend time in pursuits that are meaningful to them, and often, an environmental conscience.

For those who aim to make early retirement a reality, the first big hurdle is coming up with a figure of how much money do we really need to have?

Retirement experts say it depends on how we plan to live. One of the myths is that you will spend less right away – no job to maintain a wardrobe for, less gas with no commute, less wear and tear on the car with no commute, better health from less stress etc.

But if you are planning on traveling a lot those first few years, you’re likely to spend more on traveling and eating out,” says Steven Silbiger, author of “Retire Early? Make Smart Choices.” He he estimates that many people require 100 percent or more of their pre-retirement annual income.

If you are planning on just staying around your area and hanging out with the grandkids and your friends, you can get by on less.

Retirement advisers say make as detailed analysis of your projected living expenses as you can and look at your portfolio to figure out how much money you can take out without draining your capital. If you have big difference in expenses and income, you either need to rethink lifestyle and possibly investment strategies or keep working for awhile longer.

Financial setbacks are not something you plan on but you should consider that they might happen. Look at the prolonged dip in the stock market for example. The stock market trouble forced many to retirees to cut spending, chase higher investment returns and in some cases, even re-enter the work force.

If you quit working when you’re 50, for example, you’ve got 35 or more years to make your money last, so you’d want to have enough assets on hand or be ready to get another job if necessary.

Despite the fluctuations in the financial markets early retirement remains an attainable goal for those who can learn to be frugal and stretch their money. Planning in advance, protecting your assets and being flexible all help to make an enjoyable and sustainable early retirement.

The current rule of thumb is that you should withdraw no more than 4 percent of your portfolio’s value each year, leaving your underlying principal untouched. Some financial planner say you may be able to withdraw up to 6 percent each year if you keep two years’ worth of living expenses in a money market fund or ultra short-term bond fund. Most people now should expect to live until 90.

In a bad market, you use your reserve fund and if the downturn lasts more than two years you take from your capital again but cut your income.

Early retirement is possible, it just takes some planning and a lot of thinking ahead. If your reading this post you are have already taken the first step. For an another perspective on early retirement see our post Frugal Retirement Living

Dealing with Medical Debt

A study by the Federal Reserve Board found that nearly half of all collection actions appearing on consumer credit reports are for collection of unpaid medical bills. So if you are in the position of having unpaid medical bills you are not alone. This is a problem for many people.

Dealing with a debt collector can be scary and stressful. Debt collectors have an arsenal of techniques to drive you crazy such as harassing calls, threats, and use of obscene language

Debt collectors also try to get you to pay by exposing your secret by contacting your employer, family or neighbors.

Are debt collectors really allowed to do all these things? The Federal Fair Debt Collection Practices Act is designed to protect consumers from unscrupulous collection agencies.

The federal Fair Debt Collection Practices Act (FDCPA) sets the national standard for collection agencies. The FDCPA, enforced by the Federal Trade Commission (FTC), prohibits abusive collection tactics that harass you or invade your privacy. (15 USC §§1692-1695) The full text of the FDCPA is found at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf

Doctors and hospitals are allowed to refer an overdue medical bill to a collection agency. HIPAA, the federal medical privacy rule, allows your doctor or hospital to give information to a collection agency and also allows them to report it to a credit reporting agency.

Collection of an unpaid bill is considered a payment activity under HIPAA. So the doctor or hospital is under no obligation to consult you before a medical bill is referred to a collection agency or before a negative entry is placed on your credit report.

If you have a dispute with the health care provider or a collection agency that also should go on your credit report.

If you choose to settle a medical debt with a collection agency the medical debt will be treated like any other debt and can remain on your credit report, even after you have paid off or settled the debt.

There is a bill in the works that would place certain limits on a credit reporting agency including paid or settled medical debt in your credit report but it has not been passed yet.

Here are some preventive tips to keep your medical bills from going into collection. Even if you don’t have the money to pay them there are things you can do.

1. Make sure the bill is right – Everyone makes mistakes and insurance companies handle a lot of detailed complicated information so the possibility for error is high. Checking your bills is a good habit to get into. Checking for errors could save you hundreds of dollars.

2. Be polite – We all get tense when we find out the insurance company didn’t pay or is not going to pay. Getting ugly though only makes the clerks dislike you and not want to help you out. If you are polite they are more willing to help you out and maybe they know a way to fix the problem that you are not aware of. The clerks know the billing system way better than you do so it is smart to get them on your side.

3. Apply for Medical Financial Aid

Yes, this is for real. There are certain guidelines that must be met (income levels, percentage of debt to income etc.). But many times even if they don’t pay 100% of the debt they may pay a large portion. Often, if your medical debt-to-income ratio is over 30%, the hospital will give medical financial aid.

Find out if the hospital has a financial aid department and give them a phone call or a visit to request an application. You’ll need to list all your assets and income so they can make a determination.

4. Call to Negotiate a Discount

This is something a lot of people don’t think of probably because it is not an area where we are used to negotiating. It is okay to ask for what you need in this situation. Give the insurance company, hospital or doctor a call, speak to the billing department and ask them for a discount on your medical debt.

When they send bill to collection, the doctors office or hospital does not wind up getting that much money. The collection agency has to take their fee remember. So they are motivated to negotiate with you.

If it’s a smaller bill and you can afford to pay it off – give them a call first to ask if they will give you a discount if you pay the bill off in full.

5. Ask For a Payment Plan

If you can’t pay your medical debt off in full, the last step is to ask for a payment plan. Many doctors and hospitals will agree to this because again they will get more money this way rather than sending you to a collection agency.

After you are on the payment plan for six months and have been paying your bills on time ask for a discount. You never know until you ask it is possible they will give it to you. When you they see you are paying on time they know you have good intentions and are honorable.