Question about health Insurance

[rysy2004]

Hi,

I am new so please forgive me if this question has already been answered. I have a question about health insurance. It was mentioned in the audio book and I cannot remember the exact resource. Can someone help me with this. I see so many people working just to keep their health insurance and so many horror stories about health insurance when you are self employed. What is the real story. This cannot be that difficult can it? My job provides pretty good health and dental insurance so I am asking for help with finding reliable information about replacing these services if I am self employed. Thank You for your time.
Tina

[kamakiri]

Health insurance is expensive. I have seen it as high as $800 a month for a single self employed woman. There are however lower cost options, and things like higher deductible you can use to lower the price. I remember just after college, I specifically got a job that provided dental insurance the fastest. I needed my wisdom teeth out and they made a livable offer. I quit for a better job two weeks later.

As for keeping a job just for the insurance, that is one of the most meat headed ideas I have ever heard. One thing people don't understand is that the businesses that offer health insurance are heavily subsidizing that health coverage. A few years ago, I had 60 employees, and not a single one of them even thought that I was paying nearly their entire salary again in benefits and taxes.

People do not realize that a $200 pay check with a few deductions is not the same as a check from a customer for $200. To get the same value as a $200 pay check, realistically a self employed businessman would need about $400 from a customer.

One other thing that drives me nuts consulting is people complaining about how expensive business related expenses are. Now look At it this way, the only way to have a successful business is to have profits. Instead of decreasing expenses as a means to higher profits, go after more sales! If you are only focused on the expenses, then get out of business. It is very easy:

NO BUSINESS = NO EXPENSES

You aren't in business to lower expenses like health insurance. You are in business to make a living, so get out there and go after the next sale or customer.

[rysy2004]

I agree with what you said. I refuse to work in a job I do not enjoy just because of insurance. I am just trying to plan for the future and want to start researching options and costs for the monthly expense calendar that Timothy talks about. My husband and I have two small children and my husband is already self-employed. I have been told ball park figures of $1200 a month and wanted to investigate further. Thank You for your input.

[cnote]

I have HSA insurance for wife, two kids, and myself. It has a $5k deductible and we pay $330 a month. We're healthy and don't take the kids to the doc when they have a sniffle.

[TimW]

Kamakiri

There is a lot of truth in your post...except for one part...a $1.00 reduction in expenses is a direct $1.00 added to the bottom line. In order to add that $1.00 to the bottom line via the sales channel you need to sell between $1.50-$3.00 depending on the industry, margins, etc.

Thus, to be more profitable, from a Net Income perspective, reducing expenses has a 1:1 relationship, where more sales doesn't.

[kamakiri]

Thus, to be more profitable, from a Net Income perspective, reducing expenses has a 1:1 relationship, where more sales doesn't.

Tim - Logically your argument stands, but in the real world it doesn't hold much water. You are looking at a zero sum game there. By reducing expenses to zero, you have also reduced everything to zero.

We could split hairs here until the cows come home though. Tim has a valid argument to a certain extent, but my main point here is: instead of reducing expenses, increasing sales is far more effective strategy in the long term. Even with a 1:1 ratio, taken to the extreme, NO EXPENSES = NO BUSINESS.

Once you have a stable business model, the marginal cost of selling one more widget is also profit. TimW's COGS method of calculating profits is getting outdated in the internet age. It costs Microsoft nothing to sell that next copy of Win XP. The sunk costs are already gone. They do not actualize the cost of programming over each CD sold. The programming expense would be the same either way.

Did anyone get that?

[final_id]

Yeah, I got it. The trick is to find something where you can get yourself to the point where Microsoft is at with sales. Their "cost" for making a new CD of Win-XP (or just delivering it without CD by download over the internet) is near to zero (have to keep a website up, I guess ... ?), so further distribution of it is now their ideal plan. A better example would be a mom-and-pop sized outfit with a program to sell. Once they've GOT the program, then giving it to people is essentially free for mom and pop, so whatever they charge is straight profit to them.

I think, however, in the book Tim F is making a point about how people tend to get involved in the traditional "make your business grow" model. Mom and pop would likely undertake to get a sales representative, and sell more and more copies of their program by means of some affiliate marketing scheme that requires them to log in every day and figure out their own profits. Tim would recommend abandoning the idea of adding another minute to every hour worked and instead subtracting in order to get free time, as long as profit isn't significantly hurt.

It's really just about the trade-offs. In many situations, people are using the book more to "get free" of idiot-work (boss says I have to do it; or, we always did it that way; or, if I'm not in the office I must be a bad person), and that part of the book is, to me, the more important lesson. Your economic finer points aren't lost on me, either, though. There has to be an initial investment of "capital" in time, probably in money, in infrastructure, in knowledge, in invention, in SOMETHING. Kiyosaki would suggest that this concept is to be called "ownership" -- either (A.) having intellectual copyright on the idea (like Tim's supplements, or Kiyosaki's books), and then finding the best way to distribute at low cost and thus maximum profit, or (B.) having ownership of the means of distribution (Kiyosaki's "Rich Dad" who owned the store; a method Tim would sneer at, because it maximizes time-involvement for profit).

My big lesson from Tim F? Time isn't money.

[kamakiri]

Final - I agree with you there, but the happy middle ground of our posts is exactly what Tim is after. Having sales enough to support your life style, and on the flip side not getting greedy. In greedy, I do not mean that in a bad way. For example, I am sure that Tim could sell a lot more Brain Quicken by taking an active role in marketing the product. Magazine subscriptions, TV Shopping infomercials, campus visiting... but he is happy to live the life he is living, so he is not going after those additional sales.

Finding that balance is a lot harder for most mortals. Microsuck is going after profit. They advertise, and 'drive the monster' so to speak to maximize the profits. Tim on the other hand has different priorities, and is maximizing the relationship to sales versus free time(well, 4 hours of work a week). The next step for Tim is to invest in dividend paying stocks and work zero hours a week.

Your 'Make the Sales Grow' model is what every one is doing. Not just a tendency of most. That is lesson one in the school of business. If you aren't growing..., and that is one of the reason the book took off so well is that it presented a different idea to the masses.

The freeing yourself from idiot work is actually the easy part. Most people can be rid of that and double their salary easily within 12 months. Even with the top 10 people working with you, half of them are below average. Just showing a bit of initiative, accountability, and drive will take care of most work related dis-satisfaction problems. Michael Masterson gives a great description of how to do it in his book Automatic Wealth.

You have to be making some money, be it maximizing your profits or not, to be able to 'play the game'. A focus on profitability is necessary up to the point of being able to survive on your income. If survival to you is living in Bora Bora, than that is the magic number (and it is probably cheaper than you expect). Focusing on a reduction of expenses fist is putting the horse before the carriage.

[webgal]

My husband won't be leaving his corporate job any time soon, that's for sure. Health insurance is a big issue for us. Long story but two brain surgeries hasn't made me an inexpensive candidate for self employment health insurance. Tim might not have to worry about it but I can tell you it's a big deal.

When my husband's company was bought out, they sent us a cobra estimate. We weren't going on cobra but by law they had to send it out if you were not staying with the parent company. Mine ALONE was over $2k per month. I think the rest of my family together was around $900 per month. I also need the dental insurance as repercussions from those surgeries have left some dental issues to deal with. I'm not complaining but I am practical. and exceptionally lucky.

So, in short, if you are a single guy, it's less of an issue. If you have a family, it's a serious consideration. It would have cost some serious funds if I hadn't had insurance although they fought me every step of the way.

[TimW]

Once you have a stable business model, the marginal cost of selling one more widget is also profit. TimW's COGS method of calculating profits is getting outdated in the internet age.

Did anyone get that?

I got it, and actually it is a valid point. As much as COGS is becoming outdated in the Internet Age, it's still very much alive a) in accounting and b) for anyone selling "real" goods (i.e. "stuff" as opposed to information products or services).

My point about the reducing costs v. expanding sales wasn't meant to imply they are mutually exclusive, just that from a strictly net income standpoint, I believe there's a more direct benefit (up to a point) in reducing costs.

As an example, I sell tactical and military/police equipment. Part of what I do involves using the equipment I sell so I can give feedback to customers and to manufacturers.

I could eliminate the cost involved with this, adding several thousand dollars back to my bottom line by not using these items, then selling at a discount/loss. That's not really an option, but it can be reduced a little bit.

Next is the venue in which I use these items. I take firearms course and use this stuff in them to see how they hold up and perform. Some of these classes can cost hundreds of dollars, then there's the $150-$500 of dollars in ammunition costs for just that one class. A way to reduce this expense, and add these dollars back to my bottom line, would be to change the venue...local shooting competitions which cost much less in fees, and much cheaper in ammo used (and therefore cost).

There are a whole lot of arguments for and against each approach, mostly that my attendance at courses AND competitions is as much a marketing expense/sale pitch as it is a product evaluation. To drastically reduce these expenses may increase my net in the short-term, but in the long term would be reducing my sales as well.

So I fully understand where you're coming from....it's just more complex than I originally wanted to make it. :)


TimW
Phoenix

[kamakiri]

My point about the reducing costs v. expanding sales wasn't meant to imply they are mutually exclusive, just that from a strictly net income standpoint, I believe there's a more direct benefit (up to a point) in reducing costs.


We will have to agree to disagree here. I do understand and partially agree with what you are talking about. I restructured my business once when it was necessary and cut out $7,000 worth of monthly expenses over a period of two months once. Spending money wildly is a faster way to go out of business than any other.

Many new economy types preach that it does not take money to make money, but I do believe that you need to prime the pump. When you first start out, everything is an expense, and you can't cut anything out of the budget. Now two years down the line, your strategy comes in very handy. You really need to take a look at things (if the business survived the first two years that is). Cut the fat, then move on to building sales again.

So, yes cutting expenses has it's place, but I will take sales building over expense cutting any day. You aren't going to buy any Audi R8s by cutting expenses.

[RogerWilco]

Check out the National Association for the Self Employed they have an ok
policy with Megalife and health.

http://www.nase.org/