Smart Money Podcast: Losing Your Health Insurance, and Setting Financial Goals

Liz Weston: Welcome to the NerdWallet's Smart Money podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money, I'm Liz Weston.

Sean Pyles: And I'm Sean Pyles. As always, be sure to send us your money questions, you can call or text us on the Nerd hotline at 901-730-6373. That's 901-730-NERD. Or you can email us at [email protected]. And if you want more Nerdy goodness delivered to your device every Monday, slam that subscribe button.

Liz: In this episode, Sean and I discuss how to plan and actually achieve your money goals, with the help of one of our favorite Nerds, Kim Palmer. But first, in our This Week in Your Money segment, Sean and I dig into what to do if you've recently lost your health insurance.

Sean: Right. This is something that a lot of people are going to be dealing with if they haven't already. Because of job losses between February and May, 5.4 million people in the U.S. lost their health insurance. That's according to a recent report by Families USA, a health care advocacy group. And for some context, 3.9 million lost their health insurance due to the Great Recession between 2008 to 2009. So in just a few months, more people lost their health insurance due to COVID than during the peak of the Great Recession. These numbers are really staggering.

Liz: They are staggering, and that puts people at real risk because not having insurance means that you can be subject to just bankrupting medical bills.

Sean: And it's really difficult. And I really want to acknowledge how difficult and frustrating this entire process can be. Not only are people out of work and they have to file for unemployment — which as we know can take a really long time — they also have to find some way to be insured, and then they have to fork over a bunch of money for health care, and then navigate a seriously broken system.

So there are a few options that I wanted to talk through with you, Liz. I don't want to pretend I'm a health care expert, but I know that you have a little more experience with this than I do. I know there are a few, there's COBRA, there's the ACA, there's Medicaid. But as we go through these, I don't want to give the impression that it's going to be easy or that I'm endorsing this very flawed system; we're trying to help listeners navigate the system as it is today, so that they can make an informed decision.

Liz: And the first thing we should address is, it's going to be really tempting to go bare, meaning to not have health insurance. And I want to encourage you if you're in this situation, to try to do everything you can to get some kind of coverage. And the reason is, maybe you are healthy, maybe you never go to the doctor, but we never know what's around the corner, obviously this whole year has taught us that. We're in the middle of a global pandemic and this is not the time to be without health insurance, and it is a scandal that this situation has developed this way. So, you want to look at your options and you want to try to get some kind of coverage, even if it means giving something else up, obviously not food on the table, obviously the basics, but if you're in a situation for example, where you could put your mortgage on forbearance and that would free up enough money to do this or cut some other bill, it really is important to have some kind of coverage because things happen and you never know what's coming around the bend.

Sean: It breaks my heart that people are left to decide between whether they want to pay for their mortgage or pay for health insurance, it's just awful. But anyway, I do want to talk through a few options here. One that I think a lot of people might be familiar with is COBRA, which is in fact, an acronym for the 1986 Consolidated Omnibus Budget Reconciliation Act and not the scary snake. It might seem like a scary snake, for those who have to pay for it. But I want to hear from you what you think some pros and cons are to this, because I think a lot of people might go for this immediately because it seems accessible.

Liz: Yeah, and it's something that they're familiar with. They know what their current coverage is or their coverage with their employer and they think, well, I'll just extend this. The problem with it, it's incredibly expensive. Most people who have health insurance through their employer, that coverage is heavily subsidized, the employer is paying the biggest part of it. So with COBRA, you're paying the whole thing. You're paying your part of the premium, as well as the employer's part, plus there's a 2% administrative fee, so this is an incredibly expensive option.

I think most people are better off at least checking out the health care exchanges, the ACA exchanges that you referred to earlier, because that is typically subsidized. The premiums that you're going to be paying for most people are going to be at least partially subsidized, so that's going to be less expensive. Even if you have to go for the high-deductible plan — I don't like high-deductible plans for most people, but sometimes that's the only way that they can afford it. At least you have some kind of coverage in a catastrophic situation, but the problem obviously is that you have to shell out a lot of money.

Sean: Right. But people losing their job is what's deemed a qualifying event, which means that people can enroll in the ACA outside of the typical enrollment periods, right?

Liz: Yeah. That's a really good point. Something else to consider is that there is the Medicaid system for people who really are indigent, you can't have a lot of assets to qualify for Medicaid. But if you're in that position where you do qualify, going through the ACA exchange they're going to drop you into your state's Medicaid system, so that you could sign up that way, if that's your best option.

Sean: So we just ran through a few options here, as we mentioned, they're all pretty complicated and difficult to navigate. One thing that can help people is, to find some local help. And if you actually go to localhelp.healthcare.gov, you can get an agent or broker in your area and that way you can get some professional assistance to navigate you through, which options might be best for you, depending on your health care needs and what you can afford. So don't feel like you are absolutely alone in this, there are people who are literally paid to help people just like you.

Liz: Yeah. That's a really great suggestion, Sean.

Sean: All right. And with that, I think that we can move on to this episode's money question.

Liz: All right. Let's hear it.

Sean: This episode's question comes from Ryan. He says, "Five years ago, when I was far less financially literate than I am now, I made some poor choices that really tanked my credit scores. And I spent the last several years working to improve my credit and finances. I think I've done a pretty good job and I feel lucky to be in this position. Now I want to take full advantage of it. What steps should I consider to continue my forward momentum?"

Liz: Way to go, Ryan, this is so cool. We all make mistakes with our money, but it's how we recover from those mistakes and how we learn and move forward that's so important.

Sean: Right. And recovering from your mistakes can take time to do, but it's so exciting that Ryan is now in a position where he can finally figure out what he wants to do next.

Liz: All right. To help us talk through how to choose financial goals and meet them on this episode of the NerdWallet's Smart Money podcast, we're talking with Kim Palmer.

Sean: All right. Let's get into it. Hey Kim, welcome back to the show.

Kim Palmer: Thank you for having me.

Liz: Our listener Ryan is in a pretty good financial position right now, his issue is that he doesn't know what to do next. Really, he's not sure what his financial goals should be. So Kim, how do you think somebody should start sorting that out?

Kim: Well, I'm so glad he asked this because it's really one of my favorite topics to think about what your goals are. It's really great when you're in a position like Ryan is, where he's feeling pretty good about his overall financial position. That is really the perfect time to step back and think about where you want to be in five years, in 10 years and what you can do now to move closer to those goals. I think we all probably have such different goals, they could be big, even overwhelming sometimes. And thinking about them and breaking them into smaller steps, whether it's going on an international vacation, or buying a home, being completely debt-free, whatever it is, breaking it into smaller steps, I think can make it more manageable.

Liz: Yeah. I think when you start out with a financial problem or financial crisis, you're so focused on fixing that. It's hard to pick your head up and look around and see, OK, where do I want to go from here? So it's really great to have this first step, which is breaking it down a little bit.

Sean: Right. I can relate to that as well because I had a similar experience throughout my twenties. Wasn't great with managing my money, now that I've learned my lessons, I've done my work, I'm in a good place and I'm wondering, OK, well, what next? But it can be really hard to figure out what your values are. I would love to hear from you two, a time when you have formed a big financial goal and how you've met it?

Kim: I think I've alluded to this before on this podcast. But one of my big goals of the last several years was to start saving for college for my three children and when my daughter was born, we just didn't get around to it, it took us a while. So finally, when she was 5, I think it was, we set up our 529. And our goal, which we've met, is to just contribute even a small amount every month into that and so it's been great. Now five years later — she's 10 now — we can see how it really grows over time, so that's a goal that I'm really proud of.

Liz: For us, it was a sabbatical several years ago. We knew it was coming and I had a long time to plan for it, but just trying to get a handle on how much it was going to cost because what we did is we went to Europe for nine weeks. And that is a long time to figure out, how you're going to live, where you're going to stay, how much your food is going to cost, how much transportation is going to class, so it was a huge research project. The great thing though is, it was such an exciting goal, it wasn't hard to keep putting money aside for it, when windfalls came in they went into that fund, we had regular contributions to it. So when you're really excited about the goal, it makes it a lot easier.

Sean: I really like both of your goals because they're both so different. Liz, you had one of the most amazing vacations I could ever hope to have in my life. And Kim, you have what I wish my parents had done and I'm sure your kids are going to be really appreciative of that. But it shows that you can really have all kinds of financial goals, but it can be hard to figure out what you want to do with your money.

Liz: One of the things that really helps me figure this out, is George Kinder's three questions. And if you don't know George Kinder, he was the founder of the Life Planning movement. This was a movement in the financial planning circles to get beyond the nuts and bolts of saving for retirement and putting aside money for your kid's college education, to really focus in on what's most important to you, what your values are, what your goals are, basically making your dreams come true.

So first he has you imagining a scenario in which all your needs are covered, now and in the future. In other words, you are finally financially secure. What does your life look like? How are you spending your time?

The second scenario, is you go to the doctor and the doctor tells you, that you have five to 10 years to live. You're going to feel fine up until the end, but it's going to come sooner than you thought. So now, what do you do with your life? What changes? How are you going to spend your time?

The third scenario, you go to the doctor, but instead of being told you have five to 10 years to live, now you only have 24 hours. What will you regret? What will you wish you'd done, but didn't? Those are big, heavy questions, but they really help you focus on what's most important to you and that can help with goal setting.

Sean: Is it bad that my immediate reaction is to make some impulse purchases and hop in my car and go on a big road trip? Because not having that much time makes me want to make the most of my money right now.

Liz: There you go. Yeah, that can put a little bit too much pressure on the “today,” because we have to balance the past, and the future, as well as today. But that thing about travel, that tells me that travel is very important to you.

Sean: Yep, it's my first instinct.

Kim: I have a slightly more superficial approach, I think that also it can help just to let yourself. When you're scrolling through social media, especially Instagram, just to see what makes you feel jealous. I noticed myself really perking up, when I see families on exotic vacations together that seem impossible to afford. But the fact that I feel a little envious, makes me realize, oh, maybe that should be a goal that I try to achieve one day. So I enjoy daydreaming and goal-setting, while scrolling through Instagram.

Liz: You can take that goal and take it a number of ways, it doesn't have to be a super-expensive vacation on a tropical Island. It's you want to spend time with your family, you want to be there and have unique and memory-making experiences for your kids and there's lots of ways to do that.

Kim: True.

Sean: Well, so now that we've thought through how people can determine what their goals are, I want to talk about how to achieve them. And there are some tried and true methods of doing this. One that we like to talk about is the SMART method of goal setting, this is an acronym here. And the S is, specific, the who, what, where, when, why, which, all of those things. Measurable, how you're going to measure your goal. Attainable, making it realistic and something you can actually accomplish. Relevant, something that's worthwhile and will help you meet your needs and overall life goals. And also Timely, you have to have a time box on this. So SMART is a really popular acronym for achieving goals, but I like to do the SMARTR, adding another R to the end of this, which is rewarded.

I'm the child of two behavioral psychologists. And to me, I know that positive reinforcement is super powerful and can help you achieve your goals. So I like to say that, every step of the way that you're meeting your goal, give yourself a treat. For me, I've been trying to save a lot of money recently, just in general to have money in the bank and also because the world is pretty uncertain right now. And so every $1,000 that I have put in my bank account, I give myself a little reward, maybe that's a new pair of shoes, or a new fun plant for my house, whatever it may be to help me feel I'm achieving my goal, and also that I can enjoy what I am earning.

Kim: I love that.

Liz: Me, too — that is a great way to do it. Because for those longer-term goals, you really need to stay motivated. And if it's not a super-exciting goal, like expanding your emergency fund, you still need to have something to encourage you to keep going with it, that's great. Alongside whatever big goals you set for yourself though, you also want to make sure that you're covering the basics. That means saving for retirement, having an emergency fund, paying all your bills on time each month — super important for your credit score — paying off high-rate debt like credit cards.

Kim: And that really speaks to all the good work, I think, that Ryan has already been doing, he's of course been focused on that. So part of this is about continuing all that good work.

Sean: Yeah. I think that it's really important to have big goals like buying a home or international travel, and also just little goals of keeping the day-to-day stuff in your life going well, that's the sort of thing that you need to practice on an ongoing basis, like maybe if you had trouble paying things on time, making sure that you have auto payments set up.

Kim: Definitely. And so many of these goals really come back to saving and making sure you're staying on top of your budget or even having a budget. One tool I really like to help with that is the 50/30/20 budget, where you put 50% of your take-home pay toward needs, like your housing costs, 30% toward wants, and then 20% toward that payments and savings. I think right now with the pandemic and how it's affected so much of our patterns, our lifestyle, our spending, it's really affected especially that category of wants, where people have dramatically started spending less on things like travel and restaurants because really there's been no choice. But one thing people are considering and something maybe worth considering, is if you want to extend some of that saving, even after the pandemic lockdown start to lift. If it's something that's been useful or it's been a way to redirect previous spending habits, so you can have a bigger savings fund.

Sean: And that brings me to something else I wanted to talk about, which was how to change your goals when life throws you a curveball. That's part of why I struggle to meet long-term goals is because I'll have an idea of, OK, I want to buy a car, but then, oh no, there's a pandemic and I need to start saving all of my money and maybe I should put that other plan on hold. I'm wondering if you guys have any thoughts on the best way to redirect your goals, so that you are covering any sort of immediate emergency that can pop up, like your car breaking down or the need to hoard six months of groceries in your house, but also making sure you can still meet those longer-term goals.

Liz: Yeah, I do think you have to be flexible because obviously life changes and nobody could have predicted this year. I'm sorry, this is just beyond . . .

Sean: Yeah. Just one thing after another.

Liz: Yes, beyond imagination. So it is important to be in the habit of saving, so I think that's more important than anything else, is continuing to put that money aside. And it is important to kind of look down the road a little bit and go, well, maybe it'll take me a bit longer to get to my goal. We do that when we try to figure out our financial priorities as well, because people ask us, how to prioritize their financial goals, what needs to come first? And we have an outline of what to do when, but sometimes you need to just switch it up because life has changed.

Sean: Right. And over time, I think it's really important to check in with yourself on how you're doing, because you don't want to get stuck with a goal that no longer fits your needs.

Kim: Yes. And if you do have a partner, I think it can be useful, too, to sit down with them, so you're coordinating. I know for me and my husband, since so much of our spending and saving goals are related, it's helpful if we actually sit down at least once every few months and just review everything, see what we need to adjust, so that kind of coordination can really be helpful also.

Sean: Yeah. And they can be great accountability partners. When I was beginning to save and I was horrible at it, my partner would tell me all the time or rather he would give me a look when I was buying something and the package would come and be like, "Did you really need that pair of shoes?" And the answer is no, I totally didn't and I could have had 50 more bucks toward my saving goal, but that sort of accountability helps me a lot, I kind of need some positive punishment in a way, to let me do what I need to do. So yeah, whatever works for you.

Liz: OK. Well, Kim, do you have any final thoughts for us?

Kim: I think really the main takeaway for me is to think about, how you are spending, and saving, and getting into that saving habit. Because as long as you're saving money and you're building up those savings, it really lets you be flexible with whatever your goals are, even as they change over time.

Liz: That sounds great.

Sean: Well, thank you for joining us.

Kim: Thanks for having me.

Sean: All right. Well, now let's get into our takeaway tips. First step, when you're crafting your goal, think about what your values are, and what steps you can take to achieve them, and craft your goals around that.

Liz: Use tools to help you make your plan. You can use the 50/30/20 budget, and savings calculators, and debt payoff calculators, to help you get where you want to go.

Sean: Lastly, reevaluate as you go and coordinate with a partner if you have one or think about tapping a friend to be an accountability partner for you. And that is all we have for this episode. If you have a money question of your own, turn to the Nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. Or you can email us at [email protected]. Also, visit nerdwallet.com/podcast for more info on this episode, and remember to subscribe, rate, and review us wherever you're getting this podcast.

Liz: And here's our brief disclaimer, thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes, and may not apply to your specific circumstances.