Wednesday, 25 May 2016

Stuck With No Extended Health Benefits?

Extended Health Benefits
We are lucky enough to live in Canada and have pretty decent medical coverage through our provincial health care plans, but there's still a long list of things that aren't covered. Many employers offer membership to a group benefits plan, but if you work on contract, are self-employed, just graduated, or are in between jobs you'll want to make sure you're prepared for any medical expenses that might come up. 

Let's just talk quickly about Alberta Health Care coverage. It's FREE, you just need to make sure you register for it. You can check here for the forms you'll need to fill out and then it's just a quick trip to the registry. If you grew up in Alberta, you'll be covered under your parents until you turn 21, or 25 if you're a full-time student. Once age out of that coverage you will need to register yourself to prevent any lapses in coverage. Consider yourselves lucky, when I aged out of my parents plan I actually had to pay for it....Alberta Health only got rid of the premiums in 2009. 

What's Not Covered? 
While the government will cover a lot of expenses such as doctor exams, flu shots, standard hospital stays, x-rays, medically required surgery, etc. there is also a pretty extensive list of health services that are not included: 
  • Prescription drugs
  • Eye exams for anyone between 19 and 64 years old
  • Glasses or contact lenses
  • Routine dental care
  • Physiotherapy/chiropractors/massage therapy
  • Psychologists
  • Ambulance services
I consider myself to be (fairly) young and healthy, but I still have prescriptions, dentist visits, eye exams and glasses, and regular massage appointments. The cost of those really starts to add up, and I'm likely on the low end. 

If you don't have coverage through work to fill the gaps left by Alberta Health, then it makes sense to look for an alternative option. One option is to save up an emergency fund for medical expenses, but I've got some reservations about this. You never really know how much your medical bills could possibly cost. What if you make the decision to get your wisdom teeth pulled out (big dentist bill) and then one week later you have to take a ride in an ambulance. Unlikely? Absolutely, but isn't that exactly what insurance is cover you in the case of the unthinkable. And, at least in my case, if I actually had to pay out of pocket every time I went to the dentist, optometrist, etc. I would not be going nearly as often as I should. Routine check-ups can save you a ton of money in the long run, but it's pretty tempting to skip that dental cleaning if it's going to cost you a couple hundred of bucks. I love going for massages, and if my work benefits covered a massage a week, I would absolutely do it. Instead, I only go once a month because that's what my work benefits cover. If money out of pocket stops me from going for extra massages you can be damn sure it will tempt me out of going to the dentist. 

Choosing a Benefit Plan
First off you'll want to think about what types of things you actually need to be covered for. Wear glasses? See a physio? Have a history of mysterious injuries? These things cost money, but you can avoid the bill if you get the right coverage (ok, maybe not for ALL mysterious injuries...) You can find a more extensive list of services/procedures that are NOT covered by Alberta Health Services here. Once you've got an idea of what you need it's time to start looking at plan options. 

If you have a pre-existing condition, there are plans available that will cover it, but you're going to pay more for it (obviously). If not, you can go through the full underwriting process, and you'll get a lower rate (as long as you're healthy). One thing to note, if you've aged out of your parent's group insurance plan there is often a grace period of about 60 days where you can get signed up for your own plan and skip the whole medical part. 

Pricing for individual health benefits will vary dramatically depending on your age, medical history, type of coverage, etc. so you'll want to get a few quotes before making a final decision. I did a quick quote on the Great West Life website, and it would cost me about $70/month for their 'Core' plan (which is the basic one). To me, that's worth it. For most expenses, that particular plan would only cover a portion of the cost, but it would still give you the peace of mind knowing you wouldn't need to foot the whole bill. There are quite a few companies out there that offer individual benefits, here are few options you can check out: 
Once you're armed with some quotes, you just have to figure out which coverage/pricing option is best for you. And remember, if you're paying the insurance premiums make sure you actually take advantage of the coverage...don't let all those free massages go to waste, and you know, go get your teeth cleaned every so often! 

Side note: if you're also interested in insurance for any fur babies in your life, I did a post on pet insurance here. Might as well take care of two insurance projects at once! 

Extended Health Benefits

Sunday, 22 May 2016

Personal Finance (ish) Reads

My Favourite Books to Get you Thinking About Money
**This post may contain affiliate links, which means I get paid from the company if you purchase the product. For more information, you can check my disclaimer, and I promise to only recommend products I've tried and love.** 

Maybe you are feeling inspired to get your money matters in order, or maybe you just want some summer reading that's a little less fluff and a little more substance. Whatever has brought you here looking for a new read, I've got some good ones for you. Here are my top reads for all things finance; most of these are personal finance based but there are a few that venture out of that world and look bigger picture (let's be honest, there's only so many times you can read advice on making a budget!) I find that sometimes the books that inspire me to save the most and rework that budget aren't actually personal finance books at all. 

Wealthing Like Rabbits by Robert R. Brown

This is a really great intro to personal finance and covers all the basics you will need to get going. It's also a pretty entertaining read so it won't bore you to death. 

The Big Short by Michael Lewis
This isn't exactly a personal finance book, but it does delve into why the 2008 financial crisis happened and gives a little perspective on how what happens (or doesn't happen) behind the scenes in the investment world. Michael Lewis is a fantastic writer and is really good at explaining complex issues without making you feel stupid. The book was also created into a movie, so if you're not up for reading you should check that out, it's also really great. 

The Millionaire Next Door by Thomas J. Stanley & William D. Danko
This book takes a look at the seven traits/habits that are most commonly found in people with high net-worth. The big takeaway from this book is that those who maintain wealth throughout their lives do not live extravagantly. It's not the most exciting read but is backed with solid research and will motivate you to adjust your lifestyle to fit your future goals.  

The Wealthy Barber Returns by David Chilton
This is another personal finance read that is enjoyable to read and actually funny in parts. You'll notice a bit of a trend here, my favourites tend to be written with a casual/relaxed tone. It's written more like a novel than a step-by-step guide to your finances but still provides lots of valuable info. 

The Intelligent Investor by Benjamin Graham
Ok, this is not a fun and easy read like some of the's actually a bit of a slog. It is, however, kind of the bible of personal finance and a must-read for anyone who wants to get serious about building wealth through investing. Don't tackle this if you're just starting out, wait until you've got a little more of a base. 

Thinking Fast and Slow by Daniel Kahneman
Another pick that isn't actually a personal finance book but the focus on how and why we make the choices we do is very relevant to money and saving. If you have a better understanding of how to make decisions, you will be more apt to make the right ones.

The Total Money Makeover by Dave Ramsey
This is the book you want to turn to if you are serious about paying off debt and need a step-by-step plan of how to get that done. Dave Ramsey's system for paying off debt and getting yourself to start saving works and the book does a good job of getting you motivated to get going. I do find that he gets pretty preachy, and the book gets repetitive, but the basic concept is good. There are a lot of first-hand accounts of how Dave saved people's finances, and those were a bit much, so I ended up skipping over a bunch. 

The Opposite of Spoiled by Ron Leiber
Now I haven't actually read this book but it is highly recommended, and it's a topic that hits pretty close to home for me. Being an only child, I have often been pegged as spoiled, even though I don't consider that the case, and when I have children I want them to be raised with a good understanding of money and a drive to succeed (on their own). This book definitely has a target audience of middle-class families and lays out some pretty good lessons on teaching your kids about money and not being spoiled. 

The Black Swan by Nassim Nicholas Taleb
Another not personal finance read that will impact the way you think about personal finance. A Black Swan is a highly unlikely event that happens, and this book looks at why such events happen and why we never think they are going to. Nassim Nicholas Taleb is a brilliant writer and includes quite a few anecdotal stories to support his extensively researched subject matter, making this an interesting and entertaining read. 

Have I missed any of your favourite money books on the list? Feel free to comment below, I'm always looking for great reads! 

My Favourite Books to Get you Thinking About Money

Tuesday, 10 May 2016

Compound Interest: The Reason to Start Early

How Compound Interest Works
You've probably heard (over and over again) that you should start saving for retirement as early as possible but do you actually know why? It's a little thing called compounding interest, and it will make a BIG difference in the amount of money you can save up in the long run. Let's take a look at why this is the case. 

The basic theory behind compounding is that the more dollars you have available the more growth can happen, as long you are getting positive returns. Why is this? Well, as long as your funds are growing there will be more of them to move into the next year, and that means there are more dollars for interest to do its work on. 

Let's take a look at this in action, we're going to start off with an easy example that uses only a one time deposit. The formulas below look scary but once you break it down they make a lot of sense, I promise. 

The formula we're going to work with for this first example looks like this: 

A = future value
P = principal (initial investment)
r = rate of return
n = number of compounding periods
t = term (number of years invested)

Now let's use some numbers...let's say you make a deposit of $10,000 and want to know how much it will be worth in 30 years (without any further deposits). We're going to assume a 5% rate of return and monthly compounding, which means you would get paid your return 12 times a year (12 periods). 

Once you get that all input you will get a result of A = $44,677.44. Over four times your original investment...not too bad hey?

Most people don't save for retirement this way, though, it's much more common to make small deposits more now we're going to complicate things and look at making monthly deposits. Here's the formula we'll be using for multiple deposits: 

And now time to input those numbers; this time we're going to make $200 monthly deposits ($2400/year) for 30 years with a rate of return of 5% and monthly compounding. Without compounding this would be a total investment of $72,000 ($200/month for 30 years). 

This formula looks a little crazy, but once you get it all figured out the total future value will be $167,145.28. It's not as significant an increase as in the first example because you start out with a smaller amount but your money still more than doubles in that period so....worth it! 

Ok, last one. We're using the exact same formula here but we're decreased the number of years your save from 30 to 15. To really highlight the importance of starting early I am even increasing the total investment amount of $72,000 the same, but that means you have to contribute $400/month instead of $200. 
After crunching those amended numbers you get a result of $107,361.06. So even though you have contributed the same amount of money, because you started earlier you net out an additional $59,784.22 thanks to compound interest. Pretty convincing argument hey? You get to decrease the amount you have to contribute each month and you end up with an extra $60k. 

How Compound Interest Works