Staying on Point & Afloat Part 2: Taking Care of Personal Business

The best laid plans can be fouled-up if inadequate attention is paid to personal financial matters first. In Part 2 of my series on Staying on Point & Afloat, I cover key areas of financial concern to plan for when leaving Corporate America.

Ensuring Medical Coverage
Under the Federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), I can extend my coverage from my previous employer for up to 18 months. Yesterday, I received my COBRA election packet. The cost for me, as a single non-smoker, would be approximately $300/month ($263-medical and $35-dental). I researched additional insurance quotes at eHealthInsurance. The range for me based on gender, age, number of dependents, and location was $115 to $244 monthly depending on how much of a deductible and co-pay I am willing to assume. COBRA does tend to be costly, but is the best choice if one has a pre-existing health condition - not that I have one. Insurance aside, staying healthy is one of the best things a person can do for his or herself. It costs much less not to have to see the doctor at all, not to mention giving one more stamina mentally and physically for corporate escapee pursuits.

Getting Disability Insurance
I can do no better on this subject than redirect the reader to an unlikely, amusing, and yet informative article on the Motley Fool website entitled What factors should I consider before buying private disability insurance? Regarding one of the benefits for purchasing private disability insurance, the Fool writes:

"The policy will not be tied to your current job. This leaves you free to experience a mid-life crisis, heading off to the Himalayas with disability insurance in tow. More seriously, if you have entrepreneurial ambitions, it might be a good idea to lock in an individual policy while you can. Once you become self-employed, affordable disability insurance will be very difficult to find."

Managing Expenses
My last paycheck from July 15 is enough to cover my expenses for the next month. Over the course of the last several years, I have saved nearly half of all my income each month. This for some may be something of a radical idea. But in my mind, I earned and therefore spent only half of my actual salary. I had tracked and budgeted actual expenditures for a year's time on Microsoft Money to get an accurate awareness of my true spending habits. I was in the "habit" of spending according to budget and confirmed this less rigorously on a spreadsheet. The way I adhered to a spending budget was through the idea of tradeoffs. If I splurged or spent too much in one category, I scrimped or cut expenses in another. Last year I had particularly high veterinarian bills, so I dispensed with most luxuries and contented myself with the basics. It wasn't that I didn't have the money, but that I had trained myself to believe I couldn't afford it. The result is that I have the funds to not feel "trapped" by bills and be able to make a concerted effort towards career change or entrepreneurialship.

Rolling Over Your 401K
Taking control of your 401K is as simple as rolling it into a Roll-Over IRA with a custodian such as Fidelity. But one thing to consider is timing. I checked with Human Resources and found that I was eligible for a full company 401K match but that the distribution would not be made until next spring 2008. However, so long as I keep $5000K in the account, I can leave it in my previous company's program until I'm retirement age (assuming the company doesn't go under and continues to meet Federal requirements for a group sponsored tax shelter). I will therefore wait until I get my distribution next year before rolling my 401K elsewhere.

In Part 3 - Goal Setting