I'm Self-Employed. How to Afford Maternity Leave? Plus: 529 Plans and 401(k) Rollovers

Speaker 1: Welcome to so money everybody it's ask Farish Friday. I'm your host Farish Torabi welcome July 22nd, 2020 2 7 22 22. How's everybody doing? Did you listen to the episodes this week? I have to say we, uh, we had some popular episodes this week. Anytime you talk about housing or real estate on a podcast, people tend to tune in. And we did just that on Monday with our very own Alex Langone CNET writer [00:00:30] who wrote a really, uh, wonderful piece, a broad, uh, look at the real estate market and answering this question. Should you buy a home this year or should you maybe wait, there are some competing factors, right? There's rising interest rates, but prices are coming down a little bit. Uh, there's not as much competition. It's still a pretty heated market. Don't get me wrong, but are we at the levels that we were last summer? Uh, not quite, especially, uh, [00:01:00] on, in certain markets, but Alex did a really nice job of sort of walking us through the various considerations from, you know, obviously rising interest rates and home price trends, and also your personal life, right? Speaker 1: At the end of the day, this is the biggest purchase. Most of us will ever make a home. And, and whether we do it or not really should come down to our personal needs and goals, not so much kind of like where interest rates are. Uh, cuz as we know, if you're in this home for a long time, you could always refinance. And if you're a member [00:01:30] a generation ago, uh, our parents, if you're, you know, my age, they bought a home, uh, most likely with a double digit interest rate at one point. So it's all relative and I, I really uh, want you to go back and listen to that show. Cause a number of the questions that were in our mailbag for this week were about housing. Should I buy a home now or wait? So if you had that question or if you are thinking about that, please go back and check out our Monday episode with Alex and then on Wednesday, Nick ma Julie [00:02:00] stopped by Nick is our data guy. Speaker 1: He looks at personal finance and investing through the lens of numbers. I love that because often we don't do that, right? The, the lay person is not looking at historical data and pricing charts and trends. And, and this is Nick's, uh, you know, this is his love language. Data is his love language. And he has a new book out called just keep buying, which looks at everything from, you know, real estate, which we just talked about to investing to even big purchasing [00:02:30] decisions and how to make them with, uh, more data context, uh, because you know, while it's not the most important thing or the only thing that matters, I think knowing where, what history can teach us as far as how you know prices have been and where things are headed, uh, it's important context, right? To make financial decisions. So how to make healthy, smart choices using that data. Speaker 1: Nick majuli on Wednesday. Okay. Let's go to my favorite part of the Friday show [00:03:00] is the reviewer of the week. Who's gonna get a free 15 minute money session with me. Our winner this week is Kim Z six who wrote a review. Uh, let's see, I think it was last week calling the show thoughtful and insightful. Here's her review. I have been really enjoying this podcast recently. I'm in my early thirties and I find myself thinking about money often, am I doing the right things? What are my goals and values? The guests offer helpful insights and the topics are very [00:03:30] interesting. The most recent episode about death and money was thought provoking and somehow not upsetting at all. I also love the ask Farish episodes. It's wonderful how considerate and thoughtful Farish is in her approach. So money makes me feel less alone in my financial pondering. Speaker 1: I will definitely keep listening. Well, thank you so much, Kim and I, I, I love that you thought the episode on death and money, wasn't all doom and gloom. When I spoke with Jordan Gromit, who was our guest on [00:04:00] that a particular episode, he came with a very, I think calming. Can I even say that calming approach to this idea of our final days and how we can make the most of our time now? So that those final days are filled with fulfillment and joy and less regret. And we talked about money, of course. And what are the financial reflections that people have as they approach the end of their lives? [00:04:30] What makes them feel proud? And, and Jordan offered, I thought, um, some important reflections. He is a hospice doctor. So he, he talks to patients who are at this stage in their lives all of the time his father passed away when he was young. Speaker 1: And so he has a very, he has a relationship with death. Let's just say he, he knows it well. And he said, I want everyone to know this thing about death, which is, and I'll let you listen to the show to find out how's that for a tease. But [00:05:00] it was a really powerful reflection that he had so appreciated. And I think is what our reviewer is referring to. That it was not that upsetting. And anyway, Kim Illa, thanks so much for being in the audience for being such a thoughtful listener for, uh, hanging around. And I hope that I can help you with your money questions. You can, uh, email me Farusi so money podcast.com. You can direct message me on Instagram. Let me know you left this review. I'll follow up with a link [00:05:30] where you can pick a time for us to chat. Speaker 1: And if you wanna be next, all you have to do is leave a review. And there's a very good chance I could pick it because I'm not getting like a thousand reviews a week. I get a few and of those few, you know, your odds are pretty good of getting picked for a free one-on-one consult with me. And it's about 15, 20 minutes, which may not seem like a lot of time, but you'd be surprised how much you can get accomplished in that time. And then as I always tell my, my friends, I, I leave the door open. Let's, let's keep the conversation going. [00:06:00] You can email me, you can use this show as a way to share your concerns and questions and I will respond. So anyway, thank you so much, Kim, I look forward to hearing from you some personal stuff. You know, I'd like to share it once in a while, some personal things going on in my life, that's relevant to you. Speaker 1: I have been catching up on some health appointments. As many of us experienced in the last two years. We didn't really have time or the ability to go see our doctors and get the full [00:06:30] physicals and the breast exams and all of that. And I've been catching up. And although I have been, and as I've been doing a pretty good job of, of just, you know, doing my overall health maintenance in the last two years and talking to doctors a couple weeks ago was the first time I actually designated a primary care physician. Do you have one? This may seem very normal for a lot of people, but I think there are people like me, women in particular, where we go see our female doctor, uh, especially if we're, you [00:07:00] know, looking to have kids or we're pregnant and then we'll maybe go make an appointment once in a while to see a dermatologist, we'll go to the dentist, but there is not that one doctor in your life that is that consistent, uh, go to physician who has access to all your medical records is doing routine. Speaker 1: Blood work is the person that you can call when you're unsure about a mole or whatever, who can then refer you to specific doctors. I never really had that person [00:07:30] in my adult life. Is that strange? Well, it's not great. And it was actually my OB G Y GYN, who I saw last year. And she was like, you really need to get one you're in your forties now. And yes, I can obviously catch a couple things and you're breast exams will catch things, but you really need that designated primary go-to doctor. And so now that we've moved and we're settled in, I there's this great, um, health clinic nearby. And I, I was able to hook up with a, a great team of [00:08:00] doctors there. So that's important. I want to share that if you are not, uh, someone who has a primary care physician, you might wanna look into this. Speaker 1: If you have insurance, take advantage of it. And then this week I got a mammogram, which is my public service announcement to everybody, um, who is a woman over the age of 40. Um, you have a woman in your life that you love, who's age 40 or above. Uh, encourage them to get this annual often free mammogram. Your insurance will cover it. [00:08:30] If you have history in your family of breast cancer and you are not 40 yet, you might wanna get checked out even sooner. Because as we learn with all sorts of disease prevention, early detection is such a lifesaver sometimes. And I will. I also say that in my late thirties, I had a bit of a scare. I, uh, felt a lump and I immediately called my doctor. She immediately got me in for a, a, an early check, cuz normally at 38, you don't go in. Speaker 1: But if you do [00:09:00] feel something unusual, of course they will get you in. I was so scared between that appointment getting booked and then actually going to that appointment. I was so afraid of the, what ifs, but I will say that there's nothing better than just going to the doctor. And even if you get the news that you're hoping you're not gonna get, or that you're scared of, it's better than to just be in the dark and afraid with these feelings of insecurity and uncertainty get checked out. Because even if [00:09:30] there is something to address, you're catching it earlier than later, and that can be a lifesaver. So I'm just here to share this personal story because I wanna encourage everybody to, to take and prioritize their health. I will also say that doctors are getting fast booked. So to get a dermatologist appointment in 2022, I have I called this week. Speaker 1: They said, okay, the earliest is November. And that's because I think a lot of us are finally catching [00:10:00] up so better just to, you know, get those appointments on the calendar. Maybe you can get in, uh, a little bit earlier if there's last minute dropouts, I'm hoping, hoping I can go get, you know, my D appointment, uh, before Christmas, but you know what better than, than never. And so just my Friday, PSA health is wealth. Y'all okay. Let's talk about your money questions this week. I noticed a theme around affording parenthood and raising a child. And I touched on this a [00:10:30] bit last week and I think that sparked some follow up questions from the audience. So great. We'll go, we'll get into it. And then also how to select a 5 29 plan and a question about 401k rollover. So let's start with those family planning related questions. Speaker 1: First up is Mandy Farish besides OB GYN and hospital expenses. What other, uh, expenses costs should be considered for a baby delivery. Very smart to review your insurance coverage ahead of time before you go in [00:11:00] for your delivery, whether it's scheduled or you're just gonna go when it's time to go, I would even suggest asking your OB GYN, this very question, Mandy. So I'll, I'll help you with some considerations, but definitely talk to your doctor about this too, because FYI your doctor, whether it's your OB G Y N your dentist, your eye doctor, uh, I learned this important fact reading consumer reports one day. And is this, your doctor takes [00:11:30] an oath to give you the best medical advice and to do what is best for you. We know this, but this also includes something we don't always know, being transparent with you about what things will cost and how you may be able to better afford treatment or care. Speaker 1: So in other words, your doctor is also your fiduciary, right? Your advocate, you're financial advocate. So everybody listening, um, N never hesitate to talk to your doctor about, for example, anticipated [00:12:00] bills, how much something is going to cost and alternative ways to get the same great care within your budget. So whether it's a prescription, is there a generic form that you recommend that is safe, that is effective, but a lot more affordable? Is there a surgery that I can get that, you know, whatever you're telling me, this is gonna cost $20,000. I, my budget's $3,000. What can we do? I'll tell you a quick example with my dentist may have shared this story before, but it begs repeating, which is [00:12:30] this I had to get, I think it was a root canal or something, and wasn't super urgent. And I was also, uh, it was towards the end of the year when, as we know your insurance renews the top of the year and your coverage starts over at the beginning of the year. Speaker 1: So you have more coverage at the beginning of the year than probably at the end of the year, because by then, assuming you've, you know, you've used up some of your allowances. So all this to say that I was going in for procedure, a dental procedure, and it was gonna be [00:13:00] thousands and thousands of dollars. And I said, Hey doc, can we make this less expensive somehow? What can we do? Literally, I, I didn't know. I just, I just said, what can we do? This is kind of, uh, kind of crazy. And he goes, you know, here's what we can do. We can split this procedure up over this year and next year. So it was November. And he said, you know, normally I'd have you come and do the follow up procedure in six weeks, but let's make it eight weeks. It's still safe by then. Speaker 1: It's January [00:13:30] and your insurance has reupped and it will cover more of this expense. So we're gonna go from, you know, paying thousands of dollars to maybe just under a thousand dollars. I said, brilliant. Let's do that. Would never have happened. Had I not spoken up and said to my doctor, Hey, I wanna save money. What do you suggest? And that's a thing to keep in mind while your Dr. May know that they're there to be your best advocate. They may not always proactively say, Hey, there's a cheaper substitute or a cheaper [00:14:00] way to do something that is, is gonna, you know, be just as effective, just as healthy and, and safe. So do that due diligence, anytime you're in for a procedure or a costly for any cost with related to your, your health and your medical expenses. Now back to you, Mandy, because I've been through now two baby deliveries. Speaker 1: Uh, so talk to your OB G GYN about this. I've been saying that that's a hard, uh, <laugh>, it's hard to say OB [00:14:30] GYN, some of the costs that the hospital may charge that I know personally related to a delivery one, your stay, obviously you're gonna have to stay in the hospital to deliver this baby, but what your insurance will cover may be specific to your insurance policy. Not all insurance policies cover the same amount of time. So this is important because when you check in to deliver your baby, sometimes that's when the clock starts. And that's why my OB GYN [00:15:00] said to me, Farish, don't come to the hospital immediately when you're experiencing like your first contraction, better to wait until your contractions are really close, or if your water's broken. Because at that point, you need to obviously get, you need to get some attention. Speaker 1: This is the time to come to the hospital. Financially. Also, it's important to keep that in mind, because if you come in any sooner, that clock has started now and your, your two day stays now, maybe a three day stay when it really doesn't have to be, [00:15:30] and you're gonna get billed for that extra day because your insurance company says we only cover say 48 hours. So this is important because a, an extra day in the hospital could be thousands of dollars. And that could be out of pocket. And listen, when you're delivering a baby and the, the hours before and the days after, like you're not in the mindset of like, let me go and ask the hospital questions or look into my insurance policy. This is the time to do it when you're anticipating having a baby. Um, the other thing I wanna talk about [00:16:00] is another personal experience, which is that the night I went into the hospital for my first kid to deliver cause I, my water broke. Speaker 1: So my doctor said, come on, come on in, it was 1230 in the morning, the front door to the hospital, upper west side closed because it was 1230, but the emergency room was open and they directed everybody to the emergency room at that hour. So we went, obviously we followed directions. And then weeks later when I got the itemized bill [00:16:30] from my doctor and the insurance company had paid for almost, you know, a hundred percent of it, it had said there was a line item entry through the emergency room. And I think it was $1,800, which luckily the insurance company paid. But if I was the insurance company, I would've questioned that. Like, why are you charging patients this cost? There was no other way to enter the building. So I'm being punished because you chose to not service the main front door. That is, [00:17:00] you know, that that's the kind of scrutiny that I think, um, isn't happening or some insurance companies do it though. Speaker 1: So depending on how scrutinizing your insurance company is, you gotta watch out for these things. And, um, just if it does fall on your lap and it does become something that you have to pay out of pocket, you know, those are some red flags, and I would assume that you could contest to that because there wasn't really an alternative. It it's just kind of a gotcha cost. I think it's my opinion. Luckily [00:17:30] again, my insurance company paid for it, but I was like, whoa, imagine if I didn't have insurance or I didn't have an insurance company that was graceful enough to cover that cost. So anyway, go back and talk to your doctor about this. Your doctor has delivered hundreds and hundreds of babies and has probably faced a lot of questions. Like the ones you're going to ask and has way more tips and advice to give you than I will ever be able to. Speaker 1: So talk to your doctor. Next step is KA. She emails. You can email me too farish@somoneypodcast.com, [00:18:00] Farish. Wondering if you have any advice on how to prepare for maternity leave as a self-employed individual, I'm seven months pregnant with our second kid and I'm getting nervous taking time off when the baby arrives this fall also I'm in the process of moving into a new house and our expenses will be increasing as my income will also be disappearing for a while. Any tips are welcome. All right, KA again, I was in this boat too. I was self-employed for baby number [00:18:30] one and baby number two, this does take some planning to the best of your ability. Number one, you have to look at the math and review your savings. How much time you're gonna be able to afford without working is gonna come down to the math, right? Speaker 1: Looking at your savings. What's coming in, what's going out and looking at how much ideally time you'd like to take off. What is that going to cost to kind of keep the household running, to [00:19:00] also cover some of these expenses, try to anticipate some of those housing costs. You might wanna put off some of the work that you wanna do on the home. That's not necessary or urgent for maybe year two or year one or year two, not right away, because yeah, I agree. Like it's a lot to be not working and then having those costs. So just being really clear and maybe even overestimating what you're going to need so that you have that padding, uh, as [00:19:30] you go into your maternity leave, I took off about eight weeks and I anticipated it. I, I saved for it. And, um, I'll, uh, the second advice is to prepare your clients for your absence, managing your client expectations. Speaker 1: As far as when you're gonna be offline is very important so that you can get back into the swing of things. Smoothly, start to make some appointments and schedule meetings for month two and [00:20:00] three or four or whatever, you know, whatever you anticipate wanting to have off the week after that, the two weeks after that start making a couple of appointments to ease yourself back into the workflow. And then it's also great for your clients to know, Hey, we're gonna talk to you in eight to 10 weeks and they can plan for that. And they're not gonna drop off the face of the earth. So you can pick up where you left off. I booked a conference. Uh, I went to FinCon after I think it was two and a half months of delivering my first baby. And [00:20:30] I considered it kind of like a coming out party. Speaker 1: It was a great way to, you know, see people again and, uh, be inspired. It's where I got the inspiration to start my podcast. Believe it or not. I kind of went in with open mind and, uh, listened. And, you know, eight weeks is not a lot in the grand scheme of life and your career, but when you're self-employed, it can definitely feel like forever. And when you're out of that period, it, it, there is a bit of a, you know, of [00:21:00] reclamation. And so first review the savings that you have, maybe you learn that youd wanna pair back some of your expenses now to create more of a cushion for you while you're away from work or that you have enough and you can have more peace of mind, but you have to look at the numbers. It can be scary, but do it. Speaker 1: Now. You've got months before this new arrival, and I wish you and your family, all of the best luck and health smooth delivery. And thank you for trusting [00:21:30] me with your question. Next is Kate on Instagram, Kate or whatnot is her handle Kate's baby is one and she and her partner wanna own, they own a home. She says, but the schools are not great. We can afford to upgrade now, should we buy now or wait it out? You know what I'm gonna tell you, Kate or whatnot is go back to the Monday episode and listen to Alex, talk through some of these considerations that [00:22:00] these homeowners right now, or I should say, prospective homeowners looking to buy should consider before they do, and to decide whether to do it now or later, this sounds like you're in that camp. Um, but your baby's also only one year old. Speaker 1: And I don't really sense a huge urgency to move yet. Kindergarten is probably when your school district begins accepting enrollment and you have a few years before that happens. So in the meantime, you're probably gonna have to lean on private alternatives, like private [00:22:30] pre-K or daycare, which you might like in your neighborhood. And, and so this idea that you have to work quickly may not be the reality in your case. And that's a good thing because that buys you time to plan and think, and Hey, maybe we, I don't know, rent out our home, our existing home and go rent in another town where the school districts are better, because you may realize that renting affords you more liquidity, more flexibility. I don't know what you'll end up deciding, but I think that [00:23:00] when you have money plus time, that equals the opportunity to really think things through and not move with this adrenaline. Speaker 1: And, and just personally, I'll put in a personal story here when we were living in Brooklyn. I didn't love the public schools there either. And I had this in my mind that at some point we were probably gonna leave and go to a suburban area where schools were free and much more resourced, especially for him. My son needs extra help at school. We did private school for a little bit, but then ultimately I did the math and I [00:23:30] said, you know, we could go to private school for the rest of his education here, or we could move and then school's free. And we have a million dollars waiting for us, uh, in retirement. <laugh>, you know, and so that math to me was very clear cut. And you may discover the same thing that maybe you love this area so much. You love your home. Speaker 1: You wanna do private school for a little bit, and maybe that'll be work out for you financially instead of moving. Cuz moving is not going to be free. It's not going to be, I should say, um, without its costs. [00:24:00] And so you may decide that it's better for your family to stay put and look for a good private school instead. All right, next up is be din on Instagram guidance for selecting a 5 29 plan ish. All right, love these straightforward questions. Once in a while, we do get them. And last week someone asked about stock splits. I like to just sort, you know, go into definition mode and practical, straightforward advice mode, which isn't always emotional. Let's back up. What's a 5 29 plan. For those of [00:24:30] you who are maybe new to this, this is essentially a state sponsored tax advantaged investment account that helps parents and families save for their dependence college education. Speaker 1: Sometimes you can put the 5 29 in your own name, uh, but most cases it's for the children and the way the money is invested. Usually they're invested in target date funds, which become less risky as you get closer to your goal or closer to the point where you wanna use that money. [00:25:00] And the question is, how do you pick one? So there's states sponsored, meaning every state has a 5 29 plan, but whether you live in Nebraska or Idaho or Pennsylvania or New York, you can choose whatever states plan you want. Well, I say the first step is to look at your own states' plan because sometimes there is an advantage to investing in your own states' plan. As a resident of that state, you may receive some state tax benefits. Okay? So your [00:25:30] contributions may be tax deductible within that state. Okay. So check that out. Speaker 1: I know New York is like that. Um, in some other states, if you wanna invest in the New York plan, but you live in Idaho, you may not get that tax benefit, right? That state tax benefit benefit because you're not a tax paying resident of New York. After that, you could look at all of the states and see what makes the most sense. There are two websites I'd recommend you check out. One is college savings plan [00:26:00] network. And the other is saving for college.com. Both sites are hubs for information on 5 29 plans. And they provide details state by state listings of plans, their features, in some cases they're historical returns. If you're interested in learning about which funds and which states have done the best historically. So that's how you can go about choosing a 5 29 plan. You can also open one up directly through that state's website. Speaker 1: Every state has a website for that 5 29 plan. Okay. [00:26:30] All right. Last but not least the real Claudia Scott, when you separate from your job and you roll your 401k into an IRA, does it go in as cash? All right, Claudia. Very good question. It's a fair question because we know that when we contribute to individual retirement accounts from say our checking accounts, when it's a cash transfer from your bank account, the money goes in as cash into the IRA. And then you have to, you know, essentially pick your investments, robo [00:27:00] advisors, however will usually do the work for you. So you could go to any robo advisor, any automated investment platform, open up an IRA, then you, before you transfer the cash over or, or maybe even after you tell it where you like your risk tolerance, your goals, all of that. And it automatically creates a portfolio strategy for you and then takes your money and puts it throughout that portfolio strategy. Speaker 1: But sometimes the money just sits in cash. And then you have to [00:27:30] go and manually pick your investments with a 401k rollover though. The idea is that you're rolling over directly from like investments to like investments in the new IRA. It's not going to be necessarily apples to apples because 401k plans usually have their own breed of investments, their own brand of investments. But you, if you're investing in like an S and P 500 fund in your 401k, that exact [00:28:00] brand of S and P 500 fund may not be in that I in that IRA. But rest assured there is a broad market index fund that you could buy. And you always wanna keep an eye on the process. Most important that you're not getting a check in the mail when you're doing a direct roll over the money should never hit your bank account. Speaker 1: If it does. I'm sorry to say, it's possible to be considered a early withdrawal. You pay taxes, you pay penalty. I mean, it's, it's not what you want to have happen. So it's important to just stay on top of this. And these [00:28:30] days, a lot of it is just done automatically and it's done virtually and you never have to, you know, be burdened with a lot of time spent on this. But check is my money actually now invested or is it sitting in cash? And that is a wrap. Everybody. Thank you so much for joining love, getting your questions. You can email me, you can Instagram me. And remember we have a newsletter every week. Subscribe. We have the link down in the notes, and if you're watching us on YouTube, please hit [00:29:00] that subscribe button, share with a friend and leave your questions and comments below. We'll try to make it happen for the next week. All right, everybody. Thanks for tuning in. And I hope your weekend is so money.