Tuesday, February 17, 2015

How Being Healthy Translates into Saving You Money in the Long Run

Is there a connection between health and wealth? I think that most people inherently know that there is. But what does that look like mechanically? And how do the implications of poor health play out in your everyday finances?

Let’s be clear up front that were not talking about the type of health impairments that are unavoidable, such as Type I Diabetes or congenital heart problems. What we are talking about are the vast number of health conditions that are within our ability to control, such as obesity, hypertension, high cholesterol, and the various health conditions related to stress, among others. That is to say that where we do have control over our health, we need to exercise that control to the greatest degree possible.

Let’s take a look at some areas of reasonable concern, and view them from the perspective of the negative outcomes that poor health brings. Some are obvious, but others are so subtle that you may not even be aware of them.

The Cost of Co-payments, Deductibles and Coinsurance

This is the most obvious direct cost of poor health. Even if you have good health insurance, you will still have to pay co-payments, deductibles, and coinsurance.

For example, let’s say that you have a $40 co-payment for doctor visits, and $30 for prescriptions. If you visit the doctor once a month, and fill two prescriptions per month, you will be paying $100 out of pocket - every month. That’s $1,200 per year! And that assumes that some of the care doesn’t fall under your deductible, in which case it will cost considerably more.

If you are also supplementing your regular medical care with over-the-counter medications, you are incurring still more costs. Though over-the-counter medicines may cost less, they’re not covered by insurance at all, and the expense can mount up over time.

By maximizing your health, you avoid all of these expenses. That will lead to lower living expenses a healthy bank balance.

Impaired Spending Patterns 

How you feel physically will have an impact on everything in your life, including your spending patterns. If your judgment is impaired by poor health and by health concerns, you might easily fall into the pattern of making irrational spending decisions.

For example, you might get into the habit of buying things that you really don’t need, perhaps as a way of compensating for feeling bad. You might also delay or avoid spending money on important maintenance activities, that will lead to bigger expenses down the road.

When your body is healthy, your mind is sharp, and you’ll have better control of your spending decisions.

Weaker Job Performance 

If you don’t feel your best, it’s almost impossible to mask it at work. It will show up in the form of a lower energy level, a lack of enthusiasm, and often a pattern of mental distraction. Both your superiors and your coworkers will notice your decreased performance.

In the competitive job market that we are now in, a weakened condition could lead to your being passed over for a promotion, or even being placed at the front of the list when layoffs come. Employers will, after all, retain their most productive employees, and eliminate the least productive.

Good health will enable you to better perform at work, and that will improve both the likelihood of your job survival, and your chance of a promotion on the job.

Lost Income 

Taken to the extreme, poor health can result in increased absenteeism, which will have an affect on your paycheck if you use up all of your sick time. In addition, employers closely monitor how much time an employee takes. This is not only a direct cost to the employer (paying you for work that has not been performed), but it is also highly disruptive to the workflow in the organization.

It is even possible that you could be demoted as a result of excessive absenteeism. Your employer may decide to put you into a less challenging position that will better accommodate your health issues.

The problem is even more acute if you’re self-employed, or work on commission. Illness means less time and effort devoted to work. If you’re self-employed or on commission, this will translate to a lower income.

Good health will enable you to stay on top of your game, and maximize your income.

Reduced Job Prospects 

As the cost of health insurance continues to skyrocket, employers are looking more closely at the number of insurance claims that each employee is making. If you are a regular user of the healthcare system, you will be causing the employer’s health insurance plan premiums to rise. This is a significant cost for any employer who provides health insurance for its employees.

An employee who files continuous health insurance claims is increasingly being seen as a liability. This can increase the chance that you will be let go in a general layoff, as well as impair your chances of being promoted.

It’s also not inconceivable that a future employer may decide not to hire you. Though it may not be legal to exclude you from consideration based on health status, employers have a way of working around the rules.

By maintaining good health, you remove an important potential negative from your employment profile. That will increase your chance of being retained and promoted going forward.

Considering all of the negatives attached to poor health, you owe it to yourself to do whatever is necessary to maintain your health at a peak level. This doesn’t mean that you can make a chronic disease go away, but you can and should control what you’re able to. That means eating right, getting adequate rest, exercising, visiting your doctor regularly, and maintaining proper body weight. It will all payoff in the end , and some of that payoff will be monetary.

                       Written by: Kevin Mercadante (http://outofyourrut.com/)

Sunday, February 1, 2015

Should you be adding ETFs to your investment portfolio?

It’s only been just over 20 years since Exchange-Traded Funds (ETFs) were approved for public trading on the New York Stock Exchange, but this new kid on the block is proving to be one of the brightest stars ever.

In just two decades it has risen to be one of the most popular types of exchange-traded products.

To those who are unfamiliar with the product, ETFs work like a stock meaning that they are traded on the stock exchange. But they are actually an investment fund, holding such assets as stocks, bonds or commodities.

Only authorized large broker dealers like BlackRock Inc., State Street Global Advisors and Vanguard Inc. who have entered into agreements with the ETF distributor can actually buy and sell shares from or to an ETF, and then only in large blocks of tens of thousands of ETF shares called “creation units.”

Should you consider adding ETF's to your investment portfolio?

Generally speaking, yes, but like everything in the financial world, that answer carries a number of caveats.

Let’s look at the advantages first.

First there’s the convenience factor. Unlike an index, you can purchase an ETF with one single transaction. You allocate your investment budget and you can secure your entire mini-profile with a one shot deal as opposed to chasing each stock separately. Pretty much everyone with a full schedule likes the one-stop shopping advantage.

There’s an added bonus to that as well. Since your purchase an ETF with just one transaction, managing fees tend to be lower.

Additionally, you can secure some types of assets other than securities, and one of them is gold. If you want to hang onto a little security in tough times, the GLD ETF physically buys and stores gold. The physical gold bars are being stored in London and are audited twice yearly. GDL EFT is said to currently own more physical gold than all but three national governments.

ETFs are also reassuring to the person who is relatively passive in their investment strategy. If the stock market takes a dive, you can either just sit tight and ride out the storm with your ETF, or you can sell it when the drop hits a designated point and wait until the storm passes. You can simply place a “stop-loss” order on it like any other stock and it will be sold.

Secondly, ETFs offers some basic tax advantages because of how each trade is structured. What this means is that you will likely pay less capital gains tax for ETFs than you would for regular mutual funds.
The difference is that when your daily mutual fund trade posts a gain, capital gain taxes are incurred immediately. But for ETFs, your capital gains tax is not realized until the ETF assets are sold with the total fund.
Thirdly, ETFs are relatively simple to understand and easy to get involved with. For example, if you want to invest in a specific industry like technology, forestry or housing stocks, you can do it all with one single trade. Because of the many and varied types of ETFs available, investors can more readily achieve their specific financial goals by targeting their investments of choice, an option not as easily accomplished in a traditional mutual fund.

One of the most basic advantages of investing in ETFs, however, is the ease with which your entire portfolio can be moved from one investment firm to another, should you wish to do so. With mutual funds, simple transfers cannot always be accomplished. On occasion, the fund positions actually have to be closed before the transfer can happen, and that is a headache waiting to happen.

The investor is burdened with more fees and commissions, and may even be hit with capital gains taxes.

When you want to transfer your ETF portfolio, the move is a simple switch. ETFs are a highly portable investment, and that in itself is a strong advantage in a volatile world.

Keep in mind that what can be seen as an advantage to the personality of one investor, however, may be a detractor to another. In the case of ETFs, if you need the kick that comes from suddenly seeing your stock portfolio jump 10 to 15 percent in a certain, that is unlikely to happen with your ETF because of the diversity of its profile. However, if your temperament is distressed when you experience significant downturns from your stock investments, you will be more comfortable with the ETFs because just as they don’t soar to the same extent, they also don’t decrease to the same extent.

What are some of the other downsides of the ETF investment?
Some may be far less active on the market than traditional stocks. Depending on the industry sector in particular, some ETFs are not traded as actively as others. Investors may be frustrated in such circumstances and might actually do better in a managed fund.

There may also be international limitations in how many ETF products are available, depending on the country in which you live. While the United States has totally embraced ETFs and a tremendous variety of products are available, in some other countries their popularity has been slower off the mark and there may not be all the options that you seek as an investor. Check out your particular marketplace in advance of making your decision.

Finally, as with all investment strategies, you need to speak to your investment planner and insure that ETFs are the right vehicle to drive your individual strategy.
For example, if you have a long-term strategy to your investment portfolio, you may be steered away from ETFs which create more of an immediate advantage for short-term investors.

Knowing your own goals and time allotted to achieve them is crucial in making any investment decision. There is no “one-size-fits-all” when it comes to selecting the best investment products to get you where you want to go.

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