I am excited to write this very first post for the Center for Financial Education and Empowerment (CFEE), a center dedicated to helping individuals and families navigate their personal finances while facing significant acute or chronic health conditions. Cancer, heart disease, stroke, mental illness and many other medical conditions can pose unique financial challenges for individuals and their families affected. The magnitude of financial burden tends to increase with disease severity, and a significant change in health may result in the loss of a job and employee benefits, a reduction or loss of income, increased medical costs, early retirement, loss of insurability and more. These challenges impact more than just personal finances. They may also impact overall treatment adherence, treatment outcome, as well as quality of life for individuals and their families. Our mission at the Center for Financial Education and Empowerment is to educate individuals about personal finances while addressing the unique financial circumstances that can follow a significant change in health. Through our education and consulting resources, we strive to reduce the financial burden felt by individuals and families related to a change in health while empowering them to make informed financial decisions.
As we begin our mission, it is fitting to consider how you can begin your own mission to navigate your personal finances. Knowing when and where to start evaluating your finances can be overwhelming as well as paralyzing; a challenge further complicated by the circumstances that often follow major medical diagnoses.
If you find yourself lost on the road of personal finances, where do you start? Who do you ask for directions and which route do you take? When you are physically lost, your natural inclination may be to find a map. I believe this same practice should also apply when you are lost with your personal finances. As with any map, prior to navigating to your destination you must first take into account your current coordinates. Without starting with your current financial coordinates, you have no starting point on your financial roadmap. You are effectively proceeding blind. How do you identify your financial coordinates? To start, create a snapshot of your finances as they stand today and gather the following information:
- Assets: Your assets include your retirement accounts, your bank and savings accounts, health savings accounts, your home, autos, annuities, etc. When summarizing your assets, identify the title of each asset and notate any named beneficiaries.
- Liabilities (Debt): Identify the outstanding balances, interest rates, terms and minimum payments for your mortgage(s), credit card debt, medical debt, student loans and so forth.
- Insurance: Gather insurance policies and statements. Identify the types of insurance coverage that you have, including health insurance, life insurance, disability insurance and so forth. For health insurance, notate the key features of the coverage, including the premiums, deductibles, copays, coinsurance and maximum out-of-pocket costs. For life insurance, identify the death benefit, cash value (if applicable) and term of any policies. For disability insurance, identify the income replacement amount, the eligibility criteria and term.
- Income: Identify your major income sources. This may include employment income, Social Security, annuity income, pension income, etc.
- Expenses: Summarizing your expenses can be challenging in today’s world of multiple credit cards, bank accounts and applications. To begin an inventory of your expenses, start with your recurring fixed expenditures, then work your way through your expenses that vary from month-to-month.
- Tax Documents: Keep record of your prior year tax returns and other pertinent tax information. Income levels that are depicted on your tax returns impact more than taxes. Your income levels determine eligibility for certain government programs, taxability of Social Security, the cost of Medicare Part B and D premiums, credits and subsidies for health insurance through the exchange, and so forth.
- Legal Documents: Gather and organize any legal documents that you have. This includes Last Will and Testaments, Trust documents, Powers-of-Attorney for both finance and healthcare, advanced directives, etc.
- Goals: Write down your most important financial goals. Goals may include paying down debt, reducing medical expenses, replacing lost employment income, saving for a purchase, retirement, etc.
Gathering the above information can take time; however, the clarity that comes with organization is critical as you look to navigate a significant change in health. Once the information has been gathered and summarized to the best of your ability, you now have a starting point that can be reviewed and discussed with your spouse, caregiver, financial advisor, attorney, tax accountant and other professionals. If you are having difficulty in gathering the above information, consider enlisting the help of a trusted contact, a financial professional or consider utilizing automated financial planning tools online.
As we start our mission at the Center for Financial Education and Empowerment, I hope that we can also be a resource for you as you start your journey while navigating the financial challenges of a significant change in health. Please consider utilizing the following resources that we offer:
- Regular article posts on personal finances as they relate to major health diagnoses.
- An online forum to share personal experiences as they relate to finances and a change in health.
- Downloadable checklists, workflows and templates.
- Question and answer services for personalized guidance on personal finances.
- Educational workshops.
- Consulting and financial planning services for eligible individuals.