Financial stuff

This question is sparked by a recent conversation I had.  Someone I know asked me why they weren’t rich despite  having worked hard all their life and never spending extravagantly.  I’m pretty sure it was a rhetorical question but I thought the answer would make a good blog post.  In the instance of this particular person it was true that they had worked hard and never spent extravagantly.  The reasons the person didn’t get rich are that there job paid just enough to cover modest middle-class expenses.  Also the job did not offer a 401k or any type of retirement plan.  And what savings there were made were put in investments with poor returns and high expenses.   This person never did anything that would have allowed them to get rich.

This made me wonder what does a person need to do to get rich.  I believe working hard is part of it but it is clear to me that by itself isn’t enough.  To figure out what needs to be done to get rich I thought about the people I know who I consider to be rich or at least well-off.  They became rich through three different ways.

1. They owned a business.
2. They owned real estate investments.
3. They worked at a job that paid well above average and put their excess income into investments with a good return.

I probably could have made this just two different ways since the people I’m thinking about that made their money with well-paying jobs also made a substantial part of their wealth through real estate investments.  Looking at these three ways to get rich I have to admit that I’m not doing anything to get rich.  My blogging is a business but it doesn’t currently have the potential to make me rich.  I need to change the potential of my blog and I need to consider the other ways of getting rich as well.

The first and second ways of getting rich can be risky and even the third way has some risk.  I’m thinking the reason many people never get rich is because they never take the risk of doing something that can make them rich.   What have you done to get rich?

There are many ways that procrastination can cost you.  I have been meaning to review my advertising contracts for months but kept putting it off.  I finally got around to doing that today and discovered that two of the contracts had expired months ago but I still had their ads on my sites.  During those expired months I could have potentially made hundreds of dollars for those ads.

I have also lost out on advertising money because I’ve been slow to respond to inquiries from advertisers.  This would often result in my forgetting about the advertisers completely and losing any chance at making advertising money.  I’ve been a lot better at this lately.  I have been responding to advertiser inquiries right away and been making more deals.

The cost of procrastination isn’t always as clear as it is in this case but procrastination usually does cost you something.

I have written before about the crazy cost of health care but a recent experience has inspired me to write about it again.

I rarely go to the doctor. I think I’ve been to the doctor 4 or 5 times in the last decade. There are a couple of reasons for this. One being that for the first part of the decade I didn’t have any health insurance and since then I’ve had health insurance with high deductibles so going to the doctor is an expensive proposition. If it were not for the fact that I had a couple of “free” doctor visits when I was in law school I would have visited the doctor even less. The other reason is that I have been pretty healthy for the last decade. I haven’t had any significant injuries and very few illnesses. I don’t visit the doctor when I have a cold since there isn’t really anything they can do for it. Participating in medical studies also has a side benefit or providing me with a free physical.

But I did decide to visit the doctor earlier this year. I’d been having some pain and my wife suggested that I visit her doctor. When I got to the doctor I explained that I had high deductible insurance and needed to keep my costs down. Both the doctor and his staff were helpful and provided me with the cost of the visit and the tests to be run. They did explain that there was one test that they couldn’t be done in the office and would have to be done in the hospital lab. I paid for my visit and the tests that were done in the office at the time of the visit. They explained that I would be billed for the hospital test separately and after the cost was adjusted by my insurance company it should come to about $64.

I was not happy when a couple of months later I received a bill for $389. When I called the hospital to inquire why the bill was so high they explained that my insurance company said the test was not covered and this was the normal cost of the lab test. I knew my insurance company would not pay the bill but in the past they always reduced the bill to their usual and customary rates. This time they just stated that it was not covered. I later went to the billing office and asked if I could have the bill reduced to the $64 that I was quoted. I believe that is what my bill would have been if the insurance company would have processed it. The person there actually told me that everybody pays the same rate for the lab test whether they are an individual or an insurance company. I knew that couldn’t be true. When I showed the estimated bill the doctor’s office gave me she seemed confused and asked another worker to look at it. This worker looked the bill up on the computer and noted that the insurance company did not pay it and didn’t even apply it towards my deductible. She then told me that since the insurance company didn’t apply the bill towards the deductible I was eligible for a 40% self-pay discount. That seemed strange when I had just been told a couple minutes before that everybody paid the same rate but I figured taking the discount was my best option. I ended up paying $227 for what should have been a $64 lab test. If this had resulted in resolving my problem it would have been worth it but since I didn’t it seems like a big waste of money.

I don’t suppose there is much I can do about it. If I go to a doctor again I’ll see a different doctor and I’ll make extra clear that I want to pay all expenses at the time of the visit. Also I am going to visit eHealthInsurance and find a health insurance plan with a different company. Since I’m an affiliate of eHealthInsurance that will help offset some of the cost of getting a new health insurance plan.

David Bach has written another personal finance book, Debt Free For Life: The Finish Rich Plan for Financial Freedom.   In this book Bach gives general advice about getting out of debt.  I can’t say that there is anything wrong with the advice but if you have read or listened to Dave Ramsey or any other anti-debt gurus this advice will be pretty familiar.  His advice against getting in debt is somewhat contrary to the advice he gave in The Automatic Millionaire Homeowner: A Powerful Plan to Finish Rich in Real Estate.

He also uses the book to promote the company Debt Wise which is a partnership between the author and the credit bureau Equifax.  The company  automatically calculates the order and how much you should pay toward each account in your plan every month using Bach’s debt stacking strategy.  This is something you could do a close approximation of yourself pretty easily so I don’t think it is really worth $14.95 a month but I suppose some people would find it worthwhile.  There is another company  DebtGoal that offers a similar plan and they also charge $14.95 a month so I guess that is the going rate.

If you haven’t read other books on getting out of debt than I would recommend this book as a good resource on what you need to do to get out of debt.  If you have already read books on getting out of debt such as The Total Money Makeover: A Proven Plan for Financial Fitness than this book will probably not provide you with any new information.

? The publisher provided me with a free copy of this book for review. Spousonomics: Using Economics to Master Love, Marriage, and Dirty Dishes as you might guess from the title this book tries to apply economics to help you improve your marriage. It doesn’t seem very romantic to compare your marriage to a business but in some cases it just might work. The main thing I liked about this book is their explanations of basic economic terms. They give simple explanations of things such as division of labor, comparative advantage, loss aversion, supply and demand, moral hazard and more. I haven’t actually tried to apply any of the ideas to improve my marriage and I’m somewhat skeptical if they would actually work. I do plan on keeping the book and giving it more study to see how I might use their ideas. Perhaps I’ll even let my wife read the book even though if she reads the chapter on division of labor I’ll probably have to do more around the house. To me this book is basically an introduction to economics with a little relationship advice thrown in. If that sounds like a good combination to you then head over to Amazon and check it out. Spousonomics: Using Economics to Master Love, Marriage, and Dirty Dishes