Recession Lessons: 3 New Money Rules

The McMansion-owning, designer-bag toting, new-Mercedes-driving consumer is, well, so 2006. These days, faced with scary job prospects, fat credit card bills (that Louis Vuitton tote wasn�t even worth it, was it?!) and houses worth much less than we paid for them, the American consumer looks a lot different than she used to. In fact, she�s living by a whole new set of rules (or, at least, she should be). Here�s a look at what they are:

New Rule #1

Old Rule: Save 3 – 6 months worth of income in your �emergency fund�
New Rule: Save 8 – 12 months worth of income in your �emergency fund�
Back when jobs were plentiful and it was easy to tap into your home equity for cash, you could get away with having an �emergency fund� — money you�d use in case something happened, like you lost your job or had to fix the roof, that had just three to six months worth of income in it. “Now, that�s not enough,” says Elle Kaplan, the CEO of Lexion Capital Management. �You need at least eight months to a year.”
That�s because unemployment is still high and layoffs are common, so you may need a larger cushion. �Desperation can foil a job search,� she adds. “You don�t want to have to take a job that could hurt your career trajectory simply because you don�t have the money to keep searching for a better opportunity.”

New Rule #2

Old Rule: Go to grad school
New Rule: Do a cost-benefit analysis before taking on any school debt
Just a few years ago, it was common to head to grad school when you couldn�t decide on a career path after graduation, or you just simply hated the job you ended up with. These days, jumping into grad school is risky because you will likely take on tens of thousands of dollars in student loan debt and not be able to land a job that pays well.
�You have to ask yourself: does this make sense financially?� says Suki Shah, co-founder of career-s! earch we bsite, GetHired.com. As a general rule of thumb, you shouldn�t take on more debt than what you expect your starting salary to be, experts say. For example, if your starting salary is $50,000, don�t take on more than $50,000 in debt.
“It�s also important to look at the job market for the job you hope to get,” Shah says. �Are people getting jobs in that industry?� These days, you may be better off taking a professional development course in the field you want to move into or going to school part-time. Doing so will minimize the amount of debt you�ll have to take on.

New Rule #3

Old Rule: Buy a home
New Rule: Consider renting
A few years ago, everyone from personal finance gurus to Joe-schmo were screaming, �Buy, buy, buy!� from their overpriced rooftops. �Pre-2007, a lot of people were buying as big of a house as they could afford and then trying to flip it,� says Brian Conroy, a financial planner at Savant Capital Management.
But the tune has changed completely — to the point that in many cases, it�s simply better to rent than to buy. “It�s usually only a good idea to buy if you plan to stay in the house for a least five to ten years,” says Kaplan. �You have to expect slow appreciation.” Even then, it�s important to do your homework on everything from pricing to location to construction quality.

With or Without "Obamacare" These Healthcare Stocks Are Headed Higher

The fat lady hasn't sung yet...but she is warming up.

Three days of arguments before the Supreme Court have made it abundantly clear - "Obamacare" is in danger of being gutted or completely wiped off the books.

Only one thing's for sure. Investors will want to keep buying healthcare stocks -especially as 10,000 baby boomers a day turn 65 years old for the next 20 years.

But there's one segment of the healthcare sector that will be sitting in the driver's seat when it comes to delivering healthy profits and investment returns - no matter how the court rules.

Here's what you need to know...

Obamacare's Confusing Details

Fact is, analysts have been struggling to figure out how the Affordable Care Act (ACA) would impact various segments of the healthcare sector ever since the bill was passed.

"For most companies, the bill is neither very good nor very bad," Dan Mendelson, CEO of Avalere Health, told NPR after the bill passed in 2010. "Across each of the different segments there are pieces that will be good and pieces that will be more challenging."

That's because in addition to a slew of new taxes on pharmaceutical, hospital, and insurance businesses, Obamacare includes a dizzying array of incentives that will have a dramatic effect on industry profits.

Uncertainty surrounding the law is already rattling stocks.

Healthcare stocks have underperformed the broader market this year, up 6.4% compared to the S&P 500's 11.6% gain.
With the bill's fate up in the air, major players will have to devise new strategies for either outcome.

What Obamacare Means for
Healthcare Stocks

Here's what the law might mean for major players.

Big Pharma - Big drug makers like Pfizer Inc. (NYSE: PFE) and Eli Lilly & Co (NYSE: LLY), would pay about ! $85 bill ion over 10 years to fund ACA. They also made concessions that would save the Medicare system billions of dollars a year.

In return, they were able to kill a proposal to allow cheaper prescription drugs from Canada and were granted longer patents on generic versions of biotech drugs.

On balance, they probably would come out ahead.

Insurance Companies - The picture appears positive for insurance companies. The infusion of 40 million new people into the system is seen as a gigantic shot in the arm.

But there are huge tradeoffs.

Most importantly, the insurers would no longer be able to deny people coverage based on pre-existing conditions. They also would face billions of dollars in new taxes and restrictions.

But insurers supported the plan for one simple reason - they can pass any cost increases on to their customers.

Hospitals & Doctors -Over the next 10 years, hospitals and doctors would contribute $155 billion to paying for the legislation by taking smaller payments from Medicare and other government programs.

But if the court rules that the individual mandate is constitutional, hospitals would no longer be forced to treat patients who can't pay for their services.

The Ultimate Winner in the Obamacare Debate

There's only one sector that is likely to benefit no matter what the court decides.

Managed care companies, typically known as Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO), are already heavily involved in reducing health care costs.

They do that through a variety of techniques to reduce unnecessary health care costs by reviewing the necessity of services, controlling admissions and lengths of stay and intensive management of health care cases.

Although widely criticized for denying medical services, they are also credited with subduing medical cost inflation.
!
But here's the kicker: fully 90% of insured Americans are enrolled in plans with some form of managed care, according the industry's trade association.

That puts them in a position to profit delivering investors solid returns for years to come -- no matter how the Supreme Court weighs in.

Here are three managed-care companies that stand to thrive - whether Obamacare survives or not.

UnitedHealth Group Inc. (NYSE: UNH) - the largest managed care company provides services to more than 78 million members. Its products include risk-based health insurance and plan management for mid-sized employers, small businesses, and individuals. Shares are up 6.2% this year and have a three-year average annual return of 36%.

WellPoint Inc. (NYSE: WLP) -- is one of the largest U.S. managed care firms with over 34 million members. The company offers various network-based managed care plans to large and small employers, individual, and Medicaid markets. The stock is up 1% this year and has a three-year average annual return of 24%.

Aetna (NYSE: AET) -- the nation's third-largest managed-care organization with a market value of $16 billion, Aetna provides medical, pharmacy, dental, and vision plans. Shares are up 8.5% this year and have a three-year average annual return of 24%.

News & Related Story Links:

• Money Morning:
  Drug Companies and Hospitals Get a Boost from Healthcare Reform
• Money Morning:
  From Obamacare to Taxes: 5 Hot Topics Politicians Love to Lie About
• NPR:
  Health Care Firms See Mixed Blessing In Overhaul
• Yahoo Finance:
  Health Care Sector Is a Winner Regardless of Supreme Court Ruling