Does My Health Insurance Cover International Travel?

Passport on a blue suitcase

Planning an international trip is an exciting experience. Where to go? What to do? Where to stay? However, overlooking vital questions about safety, logistics, and money, is a mistake.

One critical question you must ask – Will my health insurance cover me? Like most things in personal finance, it depends. I’ve laid out the different scenarios below for your review.

Pre-Medicare:

If you are too young for Medicare, you likely have a policy through your employer, the Health Insurance Marketplace, or a private insurance company. Each policy will be different, so I recommend locating your policy documents to review and your insurance company’s customer service number to investigate any questions you may have.

Emergencies:

You should be covered for medical emergencies in another country. However, you must check with your insurance company before you leave to verify. Even if you’re covered, there will most likely be differences between receiving care at home and internationally.

Check your policy for exclusions based on travel destination or activity. If you plan to go skydiving in a war-torn country, a standard health insurance policy will not cover you. Also, check for any additional exclusions that may be contained in your policy.

Your insurance provider will want to be contacted as soon as possible by you or a travel companion if there is an emergency. Often within the first 24 hours, so carry their number with you.

Expect to pay for emergency services out of pocket in a foreign country. Your insurance company will then reimburse you for all covered expenses at a later date.

If you are taking an extended international trip, check how long your coverage will last. It will not be an infinite amount of time. A quick look at my health insurance policy shows coverage for the first 90 days of travel.

If your health insurance coverage is inadequate in any area, add supplemental insurance. If you have a travel credit card, it may offer some coverage. As always, read the fine print.

You can also buy a separate travel health insurance policy. Decide whether you need a primary or a supplemental plan and for how long you will need it. Insurance can be purchased for a single trip, multiple trips, or on a continuous basis. Before buying, check for the same exclusions discussed earlier. Some policies cover pre-existing conditions, and some do not. You can decide whether this is important to you, but make sure the policy’s terms meet your needs. Also, if you’re concerned about pandemics, make sure they are covered.

If you want to compare travel insurance plans, the Point’s Guy website has a list of recommended insurance providers that is frequently updated. Shop for policies based on fit, reputation and financial strength of the policy writer, and price.

American Express Travel Insurance has a nice feature where you can customize a policy to meet your insurance needs. For example, you can obtain travel health insurance without paying for other types of coverage you may not need, such as trip cancellation or baggage protection.

Non-Emergencies

Your U.S. health insurance will most likely not cover you for non-emergencies in a foreign country. Always check your policy or call your insurance company to get the details.

Even if your health insurance does not cover an in-person visit with a doctor in a non-emergency situation, it might offer telehealth services. These services are convenient and becoming more common, fueled by the COVID-19 pandemic.

Telehealth patient consults with a doctor online

An added bonus of using remote services is you can sometimes speak with your doctor back home, who knows your medical history. A U.S. doctor can send a prescription to a foreign country such as Canada in some instances. Or your doctor can recommend a drug where a prescription is not needed.

Each country has its own rules and regulations regarding health care. In some countries, pharmacists can write prescriptions or recommend over-the-counter options. Other alternatives are clinics or a visit with a local doctor. Foreign health care costs can vary widely depending on the country, so always ask about prices before receiving treatment in a non-emergency situation.

If you have a travel insurance plan, the company will have a phone number for you to call. The company will help you receive the medical care you need and make a stressful situation better by organizing your care. It may make your life much easier if your first step is to call your travel insurance provider.

Medicare

Emergencies

Original Medicare will not cover you when traveling outside of the U.S. unless you find yourself in a few narrowly-defined situations. Medicare Advantage plans may offer coverage, but this is dependent on the policy you have – check your paperwork. Some Medigap plans will cover you while traveling during your first 60 days. Be careful, though, as not all Medigap plans offer international coverage, and there is a lifetime limit of $50,000 for those that do. Expect to be reimbursed for emergency care after the fact.

If you need supplemental insurance, there are many travel health insurance options, including ones specifically targeted to seniors using Medicare. The travel insurance alternatives discussed earlier apply here as well. These policies are critical for international travelers that aren’t covered by their regular health insurance or will be traveling past their plan’s cut-off date.  

Non-Emergencies

The non-emergency information discussed previously applies to travelers on Medicare as well. Access to health care becomes even more important the older we get, so Medicare participants should take extra care to ensure there are no holes in their coverage when traveling.  

Medical Evacuation

I want to highlight the importance of medical evacuation insurance. It can be part of a travel insurance policy or can be purchased on its own. Medical evacuation insurance covers the cost of getting you to a medical facility for treatment in the case of an emergency. Some plans also cover transportation home once you are stable, which can be of significant importance when traveling internationally. Make sure the policy you choose includes the exact coverage you want.

A medical evacuation can be expensive. It can run well over $100,000, and the more remote your location, the more costly an evacuation can be.

Yellow medical helicopter

Unlike some less-important parts of travel insurance that might cover inconveniences such as lost luggage or a trip delay, medical evacuation insurance can help you avoid a catastrophic blow to your health and finances.

Medical evacuation insurance is included in some travel insurance policies. It is also a perk offered in some higher-end credit cards marketed to travelers. If neither of these options suits your needs, stand-alone medical evacuation policies are available for either a single trip or on an annual basis.

As with all types of insurance, read the fine print. Make sure you are comfortable with the limits on your medical evacuation policy. Understand the conditions for when it will kick in and who makes the decisions on where you will be transported. Policies often have exclusions on locations, activities, and pre-existing conditions, so be aware of these limitations and find a plan that will cover your unique situation.

Summary

Don’t assume your health insurance will transfer seamlessly to international travel. Fill in any gaps in your coverage through travel health insurance that meets your needs. Don’t forget medical evacuation insurance, especially if you travel to a destination with poor health care facilities or is remote. As always, check each policy you are considering carefully, ensuring you understand the benefits and exclusions that apply.


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    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

    Does My Health Insurance Cover Travel to Another State?

    Does My Health Insurance Cover Travel to Another State?

    There’s no better way to clear a room than to start talking about health insurance. However, it becomes a little more interesting when your health is at risk, and it’s desperately needed. This article is the first in a series that covers health insurance for travelers. I’ll explore scenarios that range from the occasional U.S. vacationer to long-term ex-pat and explain what type of insurance you’ll need in each instance.

    Vacations in the U.S.

    Pre-Medicare:

    If you are younger than 65 and have health insurance, it will most likely be through your employer, the Health Insurance Marketplace, or a private health insurance company. It’s always smart to check your policy before a vacation to verify you’re covered at your destination. I’ll try not to harp on this recommendation repeatedly, but each insurance policy is different, and you must refer to it for any questions you might have. I know reading through an insurance policy is the equivalent of chewing tinfoil, but it’s necessary. If you want to save time, call your insurance company’s customer service line and ask them any question on your mind – but if you’re paranoid like me, make sure they point you to the wording in your policy that confirms their answers.

    Emergencies:

    The good news is your health insurance policy should cover you in the case of an emergency as long as you are in the U.S. or its territories. HealthCare.gov defines an emergency as – “An illness, injury, symptom or condition so serious that a reasonable person would seek care right away to avoid severe harm.” All health care policies in the U.S. should have similar language.

    Sometimes you might get a surprise bill after receiving emergency treatment out of state.

    Surprise Bill Balance Billing

    This occurs when your insurance company is unwilling to pay the entire amount charged for the services you received. This procedure is called balance billing, and it happens approximately 20% of the time in emergencies. The good news is recent legislation has eliminated it starting in 2022.

    Supplemental travel insurance can be purchased if you are concerned about receiving an unexpected bill before the law changes. You might also be covered for accidents through your travel credit card – check your agreement.

    There are currently state laws that apply to balance billing, and you can find state-by-state information here. Your state may outlaw the practice. If your state lacks legislation and you experience balance billing, there are steps to reduce or eliminate the bill you can find here.

    Non-Emergencies:

    Your coverage area for non-emergency health care will be outlined in your insurance policy. Your service area is often limited to your state or region. These restrictions shouldn’t be a major concern to the occasional traveler worried about being covered in an emergency.

    The COVID-19 pandemic has been a miserable experience, but a silver lining is improved telehealth technology and availability. You may be able to jump on a video conference with your doctor, receive a diagnosis, and even obtain a prescription, depending on state laws. Check with your health care provider for options.

    Medicare:

    Once you turn 65, you’re eligible for Medicare. Luckily, your situation simplifies as long as you remain in the United States.  

    Emergencies:

    Original Medicare and Medicare Advantage plans will cover you in an emergency throughout the U.S. and its territories. However, if you’re going on a cruise, consider supplemental insurance even if you’re staying in U.S. territorial waters.

    Non-Emergencies:

    As long as you visit doctors and hospitals that accept Medicare, you are covered in the U.S. and its territories for non-emergency care when traveling. Medicare also covers telehealth services if you’d like to work with your doctor from home.

    Summary

    Before traveling, check your health insurance policy and make sure you’re covered in your destination. Any holes in coverage can be filled with a travel insurance policy or potentially with your credit card. It also makes sense to familiarize yourself with the telehealth services offered by your doctor.


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    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

    What Will Travel Look Like in 2021?

    A pay telescope with New York City in the Background

    Some experts believe there will be a slow recovery as newly-vaccinated travelers cautiously test the waters. I think this outlook is wrong – it’s too conservative if the early signs of recovery gain momentum.

    Wanderlust is building, and I’m feeling it myself. I know I’m tired of staring at the same four walls of my home, with an occasional trip to the grocery store or a restaurant to pick up food.  Armed with a vaccine, I will travel. I’m not alone.

    How do I know others are dreaming of a return to travel? 90% of participants in the Generali Global Assistance Holiday/2021 Travel Sentiment Survey indicated they’d be traveling for leisure in 2021.

    Answering a survey is one thing, but taking action, like booking a cruise, is another. In September, Carnival, one of the world’s largest cruise lines, announced 2021 second-half bookings were at “…the higher end of the historical range…”.

    So how do you prepare for travel in 2021, keeping in mind it could rebound quickly? The first question is…

    Are you comfortable traveling?

    Your comfort level with traveling is going to be fluid this year. It will change depending on whether you’ve received a vaccine or not and the overall number of COVID-19 cases in your area.

    There is no right answer when it comes to comfort level, and it may be even more complicated when making plans with family and friends as there may be varying levels.

    Decisions you will have to make include how to get to your destination? Are you comfortable flying in a small, metal tube packed with hundreds of strangers? Or do you prefer the family sedan packed with your hygienically-challenged teenagers?

    Road Trip - Feet out the window

    Where will you stay? An Airbnb can offer a contactless experience, where you won’t have to interact with employees or other guests. Some hotels and motels provide this option as well.

    Are you comfortable with riding up twenty floors in an elevator with other guests? You can try to catch only empty elevators, but there are no guarantees. Or would you be more comfortable in a motel with direct outdoor access?

    Other factors to consider are cleanliness, price, and amenities that may, or may not, be available. 

    How do you feel about being near large groups of people? A trip to the city will put you in close contact with others, whereas you might not see another soul if you vacation in the country.  

    Stay informed

    Even as the pandemic lessens, there will be areas where it may not be contained. Gauge the safety of any destination and make sure there are no restrictions in place for visitors.

    If you’re traveling internationally, many countries will demand proof you’ve been vaccinated, make quarantines mandatory, and test you on arrival. Make sure you’re aware of the current procedures in place, and then double-check them. An internationally accepted proof of vaccination has not been approved, so make sure you have proof that is acceptable to the countries you plan to visit.

    Put together a detailed itinerary and make sure the places you want to visit are open and operating hours fit your schedule.

    Where do you find all of this information? I’ve put together a resource that is a good starting point, and you can find it here:  Coronavirus Travel Advice – a Resource Guide.

    Book early, but book wisely

    If my prediction of a strong travel rebound is accurate, you’ll want to book as early as possible. Supply will overwhelm demand at some point, and prices are going to rise dramatically. However, this is with the caveat of making sure everything is refundable or covered by insurance through a credit card or separate policy.

    Consider using miles to book your trip. Purchases of airfare and hotels using miles are generally refundable but check the fine print. Another reason to use miles is the travel industry is struggling, and these miles may be devalued.

    Budget

    Has your spending dropped during the pandemic? Travel, dining out, festivals, sporting events, movies in theatres – have all been reduced dramatically in my life.

    Did someone say travel fund? Yes. That was me. It’s time to earmark some of your savings for a vacation if you were not harmed financially during the pandemic.

    I realize many people lost their jobs, and a vacation is the last thing on their minds, regardless of how much spending dropped. It still makes sense to start planning, even if the date is in the distant future.

    The simple act of planning a vacation can make you feel better. And who doesn’t want that right now?

    Photos, glassess and a book spread across a map - planning

    Putting together a detailed itinerary and budgeting for your future vacation will not only make you feel good, but you’ll be financially prepared. While you’re at it, consider tucking a little away into a tax-advantaged retirement account. (The retirement advisor in me couldn’t resist.)

    Do I need travel insurance?

    When you start to book your next trip, there will be a strong desire to buy travel insurance. The coronavirus will weigh heavily on the decision. However, before you load up on insurance you might not need, ask yourself if it makes sense in your situation.

    Only buy insurance on non-refundable expenses. Check to see if big-ticket items like airfare and hotel are refundable and under what conditions. Will you get cash back or a voucher to use another time? Under what circumstances can you receive a refund?

    Read your credit card guide to benefits, or call customer service to see if you might be offered coverage. Credit cards targeted at frequent travelers often will cover parts of your trip.

    Your homeowner’s, auto, and renter’s insurance will also provide coverage in certain situations. Check your policies as they may cover your belongings while traveling

    There’s a big difference between losing some money and risking your health. Make sure you are covered for medical emergencies and medical evacuations above all else.

    After you determine what portions of your trip are already covered, calculate possible losses. You may find out the total you are liable for is minimal. Would you be comfortable losing this amount, and can you sleep at night without insurance? If the answer is yes to both of these questions, you should be able to skip travel insurance.

    For a more in-depth discussion on travel insurance and whether you need it, you can refer to my article: Do I Need Travel Insurance?

    Too soon?

    I debated whether it was a good time to write this article. Too soon? However, I firmly believe we will be traveling again in 2021. I could be wrong, but sometimes it pays to be an optimist when planning for the future. Remember to stay informed, book early, budget wisely, and use travel insurance only when needed. Safe travels!


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    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

    5 Things We Learned About Retirement Planning and Travel in 2020

    A Shopping Cart filled with toilet paper

    2020 is almost over. It seems like a bigger than normal celebration is in order, but ironically, the usual New Year’s festivities will be muted. Lockdown orders and an unwillingness to gather in crowds will do that.

    You can’t live through such a unique year without learning something. Maybe it was how to make a mask with an old t-shirt and duct tape, or perhaps it was how to time deliveries at your local supermarket so you could hoard Clorox Wipes.

    What have I learned? I’m glad you asked.

    Do it now

    “The future is promised to no one.”

    A great quote that either came from the Bible, Clint Eastwood, or Walter Payton – Google seems confused. Regardless, 2020 reinforced this concept with the subtlety of a tire iron to the knee.

    Globally there have been 1.6 million poor souls that have died from COVID-19 – a tragic number that continues to climb and a stark reminder that tomorrow is not guaranteed.

    So, do it now. Whatever you’ve been putting off, do it now. Of course, now doesn’t necessarily mean this instant. Do it as soon as it’s reasonably safe. Time with loved ones, long-delayed retirement planning, bucket-list travel – whatever you’ve been putting off. If it’s important to you, 2020 should be that gentle forceful push to get you moving.

    A large elephant nudges a baby elephant from behind

    Don’t try to time the market

    Sure, it’s easy. Sell high and buy low.

    When you’re unemotionally scanning a long-term chart of the S&P 500 in your pajamas, with hot cocoa by your side, the 2020 market drop seems like a tiny blip. Living through it was quite different. With a pandemic raging in the world and global stock markets plunging, opening a newspaper (or news website of your choice) delivered headlines like this:

    Coronavirus Rescue Package Fails to Clear Hurdle in Senate

    IOC Considers Postponing Tokyo Olympic Games

    Coronavirus Hits U.S. Senate as Rand Paul Tests Positive

    Marriott, Hotel Owners Furlough Thousands of Workers, Cut Staff

    And my favorite :

    The Great Toilet Paper Scare

    These articles appeared in the March 22nd edition of The Wall Street Journal – the day before the S&P 500 bottomed.

    Successfully timing the 2020 market involved two trades – selling before the most rapid bear market in history and buying before the fastest recovery. I’m sure everyone has an uncle who brags about how they nailed it to the day, but for most, coming out ahead navigating this market was extremely difficult.

    How hard is market timing? The September 2007 article “Mutual Fund Flows and Investor Returns: An Empirical Examination of Fund Investor Timing Ability” measured mutual fund investors’ performance from 1991-2004. Investor timing decisions caused them to average returns that were 1.56% lower each year than they could have been. Compounded over a lifetime, this is a crippling blow to an investor’s net worth.

    There is undoubtedly an investment guru who sidestepped the crash nimbly and then bought aggressively at the bottom. You’ll hear all about their genius. Don’t be impressed until they do it a second time.

    The best course of action? Keep diligently adding to your retirement accounts. You’ll buy more at lower prices, and your nest egg will thank you. Buy and hold investing works.

    The emergency fund became sexy

    For most people, the emergency fund is boring. It’s a pile of cash in a high-yielding account (try to control your laughter, these used to exist) that sits there unloved. That’s until a once-in-a-generation pandemic sweeps the globe and leaves financial destruction in its wake.

    Financial planning 101 – save 3-6 months of expenses for a rainy day. And every so often, a torrential downpour like 2020 comes along to make you happy you did. 

    Woman stands in pouring rain with umbrella

    If you made it through the year with your job, you were one of the lucky ones. Nearly 16 million Americans were not so fortunate.

    I’ve written many times that the emergency fund is not sexy, but it’s critical when you need it. It can reduce stress and give you extra time to weigh your options when an emergency strikes.

    Retirement may come earlier than you think

    “First time in nearly 50 years people 55 and over have lost jobs at a higher rate than younger peers” – AARP

    Unemployment has hit older workers hard during a time in their lives traditionally used to shore up retirement savings. These high-income years, paired with the ability to make catch-up contributions, are often instrumental to the financial success of a retirement plan.

    Whether it’s companies trying to cull well-compensated employees, or other forms of ageism, this development is unsettling. It may become the normal course of action when future economic shocks hit the economy.

    Even in good times, older workers often leave the workplace earlier than planned. Issues such as health or caring for loved ones can cut short a career.

    The pandemic is a harsh reminder that plans don’t always go as expected.

    The best way to prepare for the unexpected is to develop a retirement plan early and fund it aggressively. If you’d like to retire the day you reach 65, put together a plan that shaves a few years off that number. It’s better to save as if you’re going to retire a few years sooner than desired because early retirement may come whether you want it to or not.

    Another benefit of conservatively preparing for a premature exit is your employer may offer an early retirement package. You will be in a better position to accept an attractive offer. Also, early retirement packages can precede layoffs, so it’s nice to have options.

    Prepare for the future

    A good plan is most valuable when the world around you is falling apart. How did 2020 treat your plan?

    If it’s important to you, plan for it. Put together a budget for expenses, review your insurance policies, make sure your beneficiaries are up to date, and your will remains true to your wishes. It’s too late to come up with a well-conceived plan when you’re in the middle of a crisis.

    If you love to travel, now’s the time to plan your future adventures. Figure out where you want to go, what you want to do, and when you want to do it. Sure, you’ve always had the dream of an African safari sometime later in life, but now’s the time to put a date on it.

    Safari at Sunset

    If you’re not doing it already, include travel in your retirement budget. Most people want to travel when they are done working, but most don’t budget for it. (Financial advisor hint: It can be expensive.)

    Not to make this into a commercial, but now’s the time to put together a comprehensive financial plan. If you have the time, knowledge, and desire to do it yourself, I highly encourage you to go for it. If you need help, find a fee-only financial advisor who will help you with it.

    Conclusion

    The pandemic we are living through is miserable in so many ways. However, the worst thing to do is not learn from it. The last nine months have been a painful time for many, but the experience may ultimately help us all make better decisions and lead a more rewarding life.


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    You’ll not only be signed up for my newsletter, but you’ll also get a PDF that shows you exactly what a comprehensive retirement plan for people who love to travel is all about. Thanks for reading!

     

     
     
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    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

    7 Financial Tips for College Grads in 2020

    Confetti fills the air over a group of college graduates

    Fall graduation is near, and although this year it will be different in many ways, the importance of starting life with a firm set of financial principles is as critical as ever. Earlier this year, I was lucky enough to work with Jared Defaria, an economics student at Johns Hopkins University. I asked him to put together a list of financial tips for college graduates, and he did a fantastic job of writing the article below. (Please ignore the “by David Tuzzolino” that appears above as I spent a half-hour trying to remove my name from the post and was unsuccessful.) Please take a few minutes to read through his work and pass on these financial tips to the new college grads in your life.


    Build a Budget

    Budgeting your expenses is the first step to ensuring that you are meeting all your needs in an affordable way and not wasting any money.  By establishing a monthly budget, you have something concrete to follow. There are dozens of helpful budgeting tools available online, so find one that best suits your needs.

    A cartoon figure analyzes a college grads budgetA college grads budget

    Or, create your own spreadsheet to establish your budget and keep track of your expenses. This will help you avoid eating out too much or forgetting about the 2 or 3 streaming services you’ve been paying for but not using.  Always keep an eye on your budget to prevent these unnecessary payments.

     

    Live Within Your Means

    In order to start building savings, it is necessary to limit unnecessary spending, especially at this stage in your life.  Eating lunches and dinners out and taking trips with your friends seems tempting with your first real paycheck, but it could wreck your budget.  There are also ways to avoid certain expenses that may seem necessary, but you can certainly live without.

    One example of this is a car.  If you can find a way to live near enough to work to avoid spending on a car, your budget will only increase for all your other expenses.  Spending a little extra on housing to achieve this could still be beneficial, but make sure you’re someone who can handle those morning strolls to the office.

     

    Create an Emergency Fund

    It may seem difficult to put money away in case of something completely unforeseen, but an emergency fund couldn’t be more important.  Whether you’re in between jobs, you incur a large medical expense, or a car repair; an emergency fund will give you that extra cushion.

    Live Within Your Means
    A good rule of thumb is to have savings equal to three to six months of expenses to keep you on your feet.  Make sure that you place the money in an account with easy access and a high-interest rate.  There are many options for savings accounts that provide a perfect spot for your emergency fund, and dropping a small piece of your paycheck into that account is all it takes.

     

    Understand Investments and Retirement Plans

    Before you can determine what retirement plan is right for you, it is first necessary to understand what they are and what they provide. Understand the differences between a 401k and Roth IRA, both of which would be sensible retirement plans for a college graduate.

    A 401k is a good option if your employer offers a company match for what you put into the account.  Make sure you know if they do and what the match is. Contribute at least up to your employer’s match to maximize the value of your 401k.

    A Roth IRA provides a great option for recent college grads.  Contributions and earnings from the account can be withdrawn tax-free and without penalty for any reason once the investor reaches age 59 ½ and the account has been open for at least five years.

     

    Quickly Pay Off High-Interest Debt

    As a college graduate, there is a good chance you are left with student loans.  However, most federal student loans for undergraduates have low, fixed interest rates that don’t need to be paid off quickly.  Once you’ve graduated college, you need to focus on paying off all high-interest debt, such as credit card debt, personal loans, and some private student loans. 

    Quickly Pay off High Interest Debt

    Much of this debt can be avoided from the start just by following most of the tips we’re discussing now.  By always paying your credit card bills on time, creating a budget, and building an emergency fund, you can avoid most high-interest debt.  Too much of this debt early on in life can weigh you down.

     

    Establish Good Credit (And Be Smart About It)

    It may seem risky to establish credit this early, but many more opportunities will be available to you in doing so.  With good credit, banks and other lenders will be much more willing to loan you money and at a much better interest rate.

    At this stage, the best way to establish good credit is to start using a credit card (and to always pay your bills on time).  By using your credit card for all regular purchases, like getting coffee or going to the movies, benefits will build up, and your credit score will improve (again, as long as you pay your bills on time).  Most importantly, make sure to still stick to your budget and avoid any impulse buys.

     

    Understand What Insurance You Need

    Insurance is necessary but, for a recent college grad, you can avoid paying hefty premiums for insurance you don’t really need.  For example, life insurance is very important once other people become financially dependent on you, but while you are still independent, you can focus on different types of insurance.

    Health insurance, car insurance, and renter’s/ homeowner’s insurance are all things to consider at this stage in your life. There is a strong chance that your employer will provide health insurance, and that is something to look into when selecting your first job. 

    More often than not, you will be renting a home once you graduate rather than owning one, so the next step to focus on is renter’s insurance.  Many people make the mistake of thinking that they will be covered under their landlord’s insurance; however, you will definitely need your own insurance.  Renter’s insurance is important for any damage you might cause, any injury on the property, and for personal items in case of theft, fire, flood, etc.  Make sure to always know exactly what is covered under your insurance plans.

    If you get kicked off of your parents’ plan, it will be necessary to purchase car insurance.  It’s important to note how to create the most affordable insurance plan, as car insurance can get expensive at this age.  You’ll need to consider what kind of car you’ll have, where you’ll be driving, how much you’ll be driving, and your previous record when considering insurance, as those will all be factors in the cost. 

     

              Written by Jared Defaria


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    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

    Your Travel Budget Is About to Implode – Here’s What to Do About It

    A crying piggy bank is broken open and a travel budget (pennies) lies all around.

    Econ 101

    You remember Econ 101, don’t you? It was that class you took freshman year of college where you sat in an auditorium filled with 500 of your classmates watching a dry professor drone on about widgets while viewing an unending series of graphs. If economics wasn’t your calling in life, you probably forgot most of the material.

    However, if there is one universal lesson that you learned, it’s supply and demand. And this is why your travel budget is about to implode.

    If you’re gearing up for retirement in the next two or three years, it could be incredibly ugly. And even if your ultimate retirement date is far in the future, this economic concept is going to affect your travel plans greatly for the next several years.

    Supply

    COVID-19 has dealt a serious blow to travel infrastructure. Cirium, a travel industry data and analytics company, reports global flight volume is down 54% year over year, and 30% of the worldwide airline fleet is in storage.

    In a September American Hotel & Lodging Association survey, half of the hotel owners stated they were in danger of foreclosure. Popular travel destination and early-pandemic hotspot, New York City, is being especially hard hit. According to the Wall Street Journal, the state of New York could lose 250,000 rooms permanently, which equals about 20% of supply.

    The cruise line industry has been decimated, and nearly all ships are docked.

    Docked, deserted cruise ship

    Industry leader Carnival is reducing its fleet by 18 ships, equivalent to 12% of capacity. It’s uncertain how many of these ships will be purchased and returned to service by other cruise lines and how many will be scrapped. This supply is not coming back anytime soon, either. Carnival has already announced there will be no ship deliveries in 2024 and only one in 2025. After scrambling to keep companies afloat in 2020, it will not be easy for cruise line management teams to jump back into growth mode and order new ships anytime soon. 

    Restaurants are in better shape than many other leisure-related companies given their ability to operate at reduced occupancy and provide delivery, but their struggles are still severe. The National Restaurant Association expects approximately 1 in 6 restaurants in the U.S. to close in 2020. Everyone wants to open a restaurant, right? Will the old adage hold true with 2020 stresses a recent and painful memory?

    This devastation extends to the entire travel industry, and it may continue to get worse as we suffer through a long winter with COVID cases spiking in many places around the world. The good news is several vaccines look promising, and the end might be nearing. But what will remain of the travel industry?

    Demand

    I love to travel, and I miss it tremendously. I find myself reading blogs and watching videos about travel to pass the time while waiting for a vaccine. By the middle of next year, I will be visually vibrating with anticipation. I’m certainly not alone.

    A November survey by Destination Analysts states that 80% of U.S. travelers have tentative trip plans sometime over the next year. And this is before a winter, where the northern part of the country will be in virtual lockdown.

    Globe wearing a surgical mask

    Combine COVID fatigue with an effective vaccine, and you’re going to see an explosion in revenge travel.

    If the pandemic has taught us anything, it’s don’t put off doing the things you love. I think travelers are going to take this to heart in a big way. Not only will they be traveling, but exotic, bucket-list trips will likely move to the front of the line.  

    Cruise lines are already seeing signs of this pent-up demand. In September, Carnival announced that 2021 second-half bookings were at “…the higher end of the historical range…”.

    The exact timing of a travel recovery is uncertain, but it will undoubtedly come when the pandemic is under control. Unfortunately, the COVID-fatigued group of travelers that are finally set free may be in for an unpleasant surprise.  

    Demand Up and Supply Down

    You don’t have to dig out your Econ 101 textbook and a mechanical pencil to figure out what’s going to happen when a flood of travelers descends on a battered leisure industry operating at reduced-capacity. Prices will increase – dramatically.

    Expect to pay more for nearly every component of your vacation. You’ll be competing with other travelers for every flight you book, cruise you schedule, and hotel reservation you make. The days of finding last-minute discounts will be over as soon as safer conditions prevail.

    I don’t see this supply-demand dynamic reverting to normal for years. Sure, new restaurants can be opened in a relatively short amount of time, but will there be a long line of entrepreneurs willing to take the risk after witnessing the COVID carnage?

    Airlines and cruise lines can not turn on a dime. Wikipedia lists over 30 airlines that have entered bankruptcy in 2020. Some of these companies will restructure, but others will cease operations. Airlines that continue to fly are putting planes into storage and may find it uneconomical to return the aircraft to service. Building new planes can take only a few weeks, but the industry backlog could grow rapidly with an increase in demand. Building a new ship can take years, and larger vessels cost over a billion dollars.

    The crush of travelers released from COVID hell will run full speed into a reeling travel industry. Prices will spike. It may take some time for these companies to heal, and a rush to increase capacity is unlikely. The travel industry will enjoy robust pricing (deservedly so given their recent pain), and your vacations will cost more. There will come a time when entrepreneurs increase capacity to meet this high-margin demand, but gun-shy business owners may be slow to react.

    Solution

    It’s time to take a hard look at your travel budget. Does it still make sense? Will you be able to afford the elevated prices that could last two to three years? If you’re like me and refuse to give up your travel dreams, here’s what you need to do.

    Save more money. It’s time to start funneling more money into your travel budget. If you’ve been fortunate enough to keep your job and are working from home, you’ve likely decreased spending on dining out, commuting, entertainment, etc. Earmark at least some of your savings for travel, and you’ll be prepared for higher prices.

    Money being placed in a pink piggy bank

    Consider less-popular destinations. Resist the temptation to join the masses at tourist hotspots. Sure, you might want to show off your newly-gained immunity by mingling with large crowds, but your travel budget will suffer. Less-touristy destinations will allow your dollar to go further.

    Book your travel far in advance. Many businesses are offering fully refundable options. Take advantage of these and book your trip early. Prices should be lower this winter, given an uncertain future. Even if you’re unsure of the timeline for a vaccine and a return to safe travel, feel free to book a vacation as long as you’re guaranteed a full refund if you need to cancel. Make sure to read the fine print so that you completely understand the cancellation policy.

    Summary

    Studies have shown that the simple act of planning a trip can lift your spirits. So, don’t let the current pandemic stop you from dreaming about your future travels. Be proactive. Consider less-trendy destinations and increase your savings to fortify your travel budget against a more expensive travel-future. If you prepare now, when things clear, your biggest decision will be where to go on vacation, not how to afford it.

    Need some inspiration? Intrepid Travel has put together a wonderful list of 9 mind-blowing travel videos. Enjoy!


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    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.

    Is It Ever a Good Idea to Buy a New Car?

    Dark car park entrance exit

    I feel like I need to whisper this to you in a dark parking garage with my face obscured by shadows, but, “I’m a financial advisor who buys new cars.” And I will argue that, yes, sometimes buying a new car is a good idea despite the many financial pundits that will tell you purchasing a new car is one of the worst financial mistakes you can make. Here are the top five reasons you should consider buying a new car instead of one that is used.

    Getting Exactly What You Want

    Have you ever found yourself wandering the aisles of a used car lot or scouring a website searching for the perfect car? Rarely do you find exactly what you’re looking for. One car has every feature you could dream of, except it has a metallic-mustard paint job. Another vehicle is perfect in every way, except your history of backing into poles makes the absence of a backup camera a non-starter.

    Buying a used car is often filled with compromises. However, if you decide to buy a new car, you can have it delivered the exact color, and with the exact features, you desire. Some of these choices can also save you money. Buying a used car can result in being stuck with expensive options you don’t necessarily want.

    My last car-buying adventure was eight years ago. Three decisions I remember clearly were All Wheel Drive (AWD) or Rear Wheel Drive (RWD), standard or automatic transmission, and whether I needed a navigation system or not.

    I bought a new Lexus, and the experience is still fresh in my mind. One feature I was happy to skip was the navigation system. I remember staring at the price tag and then my phone. Price tag. Phone. I couldn’t justify the price versus the free navigation system in my hand. Thank you, Google! I’m not sure exactly how much I saved in 2012, but if you decide to skip the navigation system on a new Lexus IS today, you’ll save $1,670.

    Most of the cars on the dealer lot had AWD. Safer? Perhaps, but also more expensive. I could have saved approximately $2,000 by selecting a RWD car. For someone who has a short, or no (thank you coronavirus), commute, and rarely needs to drive in poor weather, this option could be attractive.

    My first car was a 1976 White Datsun B210, and it had a stick-shift. I still have an affinity for manual transmissions and only recently bought an automatic.

    Stick shifter in black and white

    You can save between $1,000-$2,000 by going old school. Unfortunately, the stick-shift is dying out, but it’s another example of a feature you can select in a new car to lower the price.

    There are dozens of places to save money on a new vehicle. Don’t like leather seats? Order cloth. Would you be happy with a 4-cylinder? Downgrade from the V6 engine to save money. Not everyone wants a moonroof. If you can do without, you might be able to save some money.

    All of these extras add up, and if you are buying a used car, you will be stuck with the features already decided for you. If you order a new car, you can drop unwanted options and potentially save thousands of dollars while getting exactly what you want inside and out.

    A caveat here is if you strip out options that everyone else wants, you’ll likely get a lower price when you sell your car. However, if you’re like me and you plan to drive your new car for a dozen years or more, this will matter less. And if your new car is perfect in every way, you’ll be less likely to begin eyeing up the new models after a few years.

    Technology

    The speed of technological advances is accelerating in society, and new cars are no exception. There may be advanced features on the latest model that are absent from older cars – technology that is important to you. One area of emphasis is safety. New technologies include lane-keep assist and automatic emergency braking. If this is a brand-new feature and you want it, buying a new car is the only way to go.  

    Is parallel parking the bane of your existence? Would you rather walk three blocks to pay a valet $30 to avoid parallel parking for free in front of a busy restaurant? Self-parking technology alone might be worth buying a new car if older models don’t have it. There are many features that may make purchasing a brand-new car attractive depending on the model you’re considering. 

    Low Interest Rates

    The average credit score in the U.S. has been around 690-700 over the last 15 years. And according to Bankrate, the Annual Percentage Rate (APR) people pay for a new car with a score in the range of 661-780 is 4.68%, versus 6.04% for a used car.

    As reported by Edmunds, the average length of new and used car loans have increased over the last decade to 72 months. Let’s take a look at the overall cost difference of buying a new versus a used car.

    The best-selling, non-pickup truck for 2020 is the Toyota RAV4. Using pricing and depreciation data from Caredge, I calculate the total cost with a 72-month loan to be $34,094 for a new RAV4 and $30,998 for a one-year-old model. That’s a difference of just over $3,000 for the six-year length of the loan.

    White Toyota Rav 4

    The loan’s overall cost for the used RAV4 was lower due to a lower purchase price, but the used car owner paid over $600 more in interest charges due to a higher rate. Always keep in mind that the APR difference between new and used has a cost.

    If you have excellent credit, there are often opportunities throughout the year to get an even lower rate. For example, Toyota is offering 0% APR, as I write this article, for 60 months and 2.9% APR for 72 months. You won’t often see rates this low on used cars. Just remember to always check the fine print on any loan.

    Negotiations

    This may be the best reason of all to buy a new car. It’s not a monetary win, but there is a tremendous value gained by not having to haggle with a used-car salesperson. I have accompanied several friends to buy a used car and my experiences, unfortunately, matched the used-car salesperson stereotype. I sat through high-pressure sales, a focus on payment and not price, and frequent huddles with the manager.

    The difficulty of negotiating the price of a used car is – no two are alike. Options, condition, and mileage differ between every vehicle. These differences put you at a negotiating disadvantage.

    The beauty of negotiating for a new car is each one is identical. Yes, options can vary, but each car you purchase should be in showroom-floor condition with a handful of miles. And if you can’t find a vehicle with the exact options you want, you can order a new one from the factory. This uniformity allows you to more easily negotiate the price of your new car with several dealers.

    Not a fan of the negotiation process at all? Let me introduce you to the Internet Sales Manager. Without even stepping into the dealership, you can get the price for the car you want simply by sending an email. Contact several firms that each have the same car (or can get you the car), and lower your price by having them bid against each other. Only when a price is finalized will you have to stroll into the dealership – your negotiations complete.

    Admittedly, you can also negotiate used-cars by email. However, negotiations tend to be more difficult when you’re not comparing apples to apples.

    Private Sellers

    If you plan to buy a used car from a dealer, this won’t apply to you. However, to get the best price on a used car, you’re going to have to buy it from a private seller.

    Safety is always a concern when buying a car from a private seller. A dealership may have its faults, but worrying about your security isn’t one of them. There is no telling who is on the other end of a private sale.

    A man in a gray suit menacingly points a banana

    You’re also going to have to take care of the transfer of ownership paperwork and complete it yourself. The details for each state will vary, but most involve some legwork. In Pennsylvania, you will need to take a trip to the Department of Transportation as an agent will have to witness the transfer.

    When you’re buying a used car from a private seller, you have little recourse if it turns out to be a lemon. You want to have it inspected by a mechanic you trust and ask a lot of questions about its history. Obviously, this involves time and money.

    Is a new car from a dealer looking better to you now? You can avoid most of the private seller headaches by purchasing a used car from a dealer, but you’ll pay extra for the privilege, and the spread between new and used car pricing will narrow.

    Summary

    Don’t immediately assume a used car will be the right choice for your next car purchase because that’s what you’ve heard from the experts. Investigate the used-car inventory in your area. Compare new and used-car pricing. Then compare these options with ordering a car from the factory with precisely the features you desire. Weigh the differences in pricing, interest rates, technology, and your comfort level with negotiations to make your final decision. You may find that by cutting a feature you don’t want, sticking with a car that depreciates slowly, and scoring a low interest rate, a new car will be just as, or more, attractive than a used car.


    Enjoy what you just read? If so, you can subscribe to my newsletter below. You’ll also receive a PDF that shows you exactly what a comprehensive retirement plan for travelers looks like. Thanks for reading!

     

     
     
  • *Privacy policy: your email address is safe, and you will never receive SPAM.

    Financial Advisor David Tuzzolino

     

    David Tuzzolino, CFA, CFP®, is the Founder and CEO of PathBridge Financial, a firm that specializes in providing comprehensive financial planning and investment management services for clients that are nearing retirement and love to travel.