FrugalJim

As I mentioned in my last post, the wife is now attending Duke to get her MBA.  At the beginning of this term, she signed up for a class related to the medical industry called Health Sector Management, or HSM for short.  During that class she was exposed to a plethora of information about the health industry, mainly being exposed to the current problems and ideas to how we might solve them.  This was a great introduction to the industry, and even though it doesn’t look like she’s going to be trying to get a job in health care, we had some great discussions about it.

One of the main problems as everyone knows is the fact that health care costs are rising at a very high rate.  While there are many reasons for this, one of them is that the industry is treated like a free market, but there is one missing component: information.  Customers (patients) don’t have a clue what the actual price is for the medical treatments they’re receiving.

When I go to the doctor, I really just assume that either a) it will be covered by insurance or b) I will have to pay a small amount like a co-pay or co-insurance.  The true cost is never even exposed to me.  Behind the scenes, the doctors and insurance companies have negotiated ahead of time what they are going to charge and pay for certain services.  This price can even be different depending on what insurance company you have or what groups your doctor is a member of.  And to top it off, if you don’t have insurance, the doctor is going to charge you even more than they would the insurance company!

I thought about what could be a way to help lower these costs and shed some light on how this whole industry is operating, and I decided to do something about it.  I created a website to allow everyday people to share no only how much medical care they received cost, but also which doctor charged them that amount, and what insurance actually paid to the doctor.  If enough people start using this website, eventually we’d be able to come up with serious tools to help insured and uninsured patients lower their bills.

If an uninsured person wanted to go to the doctor, but they were worried about how much it would cost, they could look it up and find the cheapest doctor in their area.

On the other hand, if an insured person gets a new job, how do they know what insurance plan to pick of the 3 or 4 their company offers?  They could look up and compare the different plans according to their age/health and projected medical costs, and pick the one that would mean less money out of their pocket.

Does this sound good?  Check it out and help shed some light on how much medical procedures are really costing by posting your own information.  And if you have any comments or suggestions, post them on this blog and let me know.

The new website: www.ProceedYours.com

The definition of insanity is repeating the same process over and over again while expecting a different result.  Well, I’m not insane, but it all seems pretty familiar.  I’m now living in Durham, North Carolina, while the wife is attending business school at Duke.  The original intent of this blog has now been realized, yet I’m no longer posting.  We’ll have to change that.

I’m going to try and post some insightful articles on finance, stocks, and living in general.  However, I don’t think I’m going to try and be as ambitious about the number of postings I get out there.  I’m a busy man now, so I’m probably going to shoot for about 1 article a week.  Hopefully if I can focus on that, they’ll be a little higher quality and more interesting.

Until then…

I’m calling the bottom of the housing market in September 2010.  When the article on the front page of Time Magazine targets a specific sector of the economy, it’s usually long past the turning point.  In fact, by the time the topic makes it to Time Magazine, it’s no longer “new”.

We’ll have to see how this plays out…

When moving to a new city, state, or country, it’s pretty important to understand what you should expect as a salary.  For example, I might be a high roller here in Orlando making $50k but take that salary to Manhattan, and I’m gonna be slummin’ it.  I think some meals might even cost more than $50k up there.

The first thing to take a look at would be the cost of living adjustment itself.  I found an online calculator here that’s pretty good.  According to it, someone making $50k in Orlando needs to earn $110k in Manhattan, just to keep their living standards.  That’s crazy!  Though it looks like housing is the biggest factor, because you would have to spend 357% more on housing there than in Orlando.

The next thing would be the tax difference.  In Florida, there’s no State income tax, but you can bet most places will.  According to Wikipedia, 7 states do not have a state income tax, and 2 others only tax dividends and interest income.  It’s no wonder all the old people migrate to these states.

Anyways, how would you calculate the adjustment?  Lets say you make $50k in Florida with no income tax and are moving to North Carolina, where income tax is approximately 7%.  Would you just multiply $50k by .07 to see how much extra you need?

$50,000 X .07 = $3,500

So you would need to make $53,500?  Not so fast.  Let’s say you made $53,500 and you had 7% withheld for state income tax.

$53,500 X .07 = $3,745

Something doesn’t add up quite right…

In reality you need to take the current tax free income $50,000 and divide it by 1 minus the tax rate, or (1 – .07) = .93… So:

$50,000/.93 = $53,763

AND

$53,763 X .07 = $3,763

There we have it… So summing up:

(TAX FREE INCOME) / (1 – TAX RATE) = (EQUIVALENT TAXED INCOME)

Then take that and multiply it by the cost of living adjustment to get your total income requirement to keep your same income in a different State.

A few weeks back, I was doing a mental experiment on different methods to trade stocks.  It got a little too complicated and I wondered if there was an easy way to test the theories I was thinking about.

Many times, I’ve heard of people “paper trading” to test their skills in the stock market without actually putting any skin in the game, so I decided to look around to see if a site would allow me to do just that.  Unfortunately, I couldn’t find one that seemed too appealing.  Either the site was very unimpressive, or it seemed like they just wanted to get my information so they could bombard me with ads.

I gave up on the idea.

A few days later, I noticed an interesting article about a new startup investing website, kaChing.  This site allows you to set up a a virtual portfolio of $10 million and buy and sell stocks.  It includes a hint of social networking, since you can see other people’s portfolios and can share information.  While this pretty cool in and of itself, the real kicker is how the site actually makes money.

If you stick with the site and trade, they assign you an investor IQ, which is basically a automated rating of how good a trader you are.   If you meet some other restrictions, you can then become a “Genius” and people can choose to invest like you.  The customer then sends kaChing money to invest, and whenever you buy or sell in your virtual portfolio, kaChing does the same moves with the customer’s money.

As a Genius, you set your rate for managing money (say a %1 fee for people investing like you) and kaChing takes a cut.  The more money you “manage” the more you and kaChing can make.

Am I the only one who thinks this is really cool?  While I doubt I’ll ever become a Genius, the site is awesome for paper trading.  If you want to follow me, my investor ID is 76659.

Right now, kaChing has around $3 million in actual invested money.  If this idea takes off, those guys are going to make a killing.