A New Year how to: save money by finding it
It’s that time of year again; the one when news sources are filled with tips on what New Year’s resolutions you should make and how to save money. But at LendingPoint, we do things a little differently and for good reason.
While 58% of Americans say that their financial situation needs improvement, according to U.S. News & World Report, 80% percent of New Year’s resolutions fail by February. Rather than set a resolution, we challenge you to set money goals. Our goal is to help you save money by finding it. Here are three ideas to help make 2020 your best financial year yet.
Find money by utilizing a pre-tax health savings account.
Financial advisors are calling this the loophole trick. You can use pretax dollars to pay for healthcare expenses with a Flexible Spending Account (FSA) or Health Savings Account (HSA). Did you know that Amazon.com has an entire section dedicated to eligible, everyday hygiene products you can buy using these accounts? By using your pretax dollars, the products you use every day will cost you less. How do you decide which one is best for you?
According to valuepenguin.com, “The most significant difference between Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) is that an individual controls an HSA and allows contributions to roll over, while FSAs are less flexible and are owned by an employer.”
While HSAs are not intended for retirement, they are used to support you in paying for qualifying healthcare expenses; and because the total contributed into this account can rollover year over year, it can act as a powerful retirement savings tool.
Use It or Lose It
Unused funds rollover year over year
Maximum Yearly Contribution
Up to $3,450 individual. *
Up to $2,650 individual.
Penalties for Withdrawing Funds
After 65, savings can be withdrawn from the account tax-free.
Depending on where you work, employees might not have access to funds for non-medical expenses.
Tax refunds = found money.
Your peace of mind is not for sale. Knowing that you have money stashed away for an emergency will allow you to sleep better at night and in the long run, make better financial decisions. If you have the ability to stash it, you should consider it. If you have to spend it, do so wisely: rid yourself variable interest debt (more on that in #3), set up an emergency fund, feed your retirement account, and the list goes on. In 2019, the average tax refund was $3,068—that’s a good chunk of money to do something or nothing with.
Move your debt around to save money on interest.
The cost of borrowing money is interest. However, you can save thousands of dollars by understanding how interest works and moving your debt around.
- More and more people are moving away from revolving and variable debt like credit cards. Credit card companies have the power to raise interest rates at any time and they do. Popular alternatives include fixed rate options such as conventional home equity loans (not HELOCs) and simple-interest personal loans.
- Home equity loans provide borrowers the ability to borrow against the equity of their home, if they have any, at a fixed rate for large purchases such as home improvement needs, college education, and medical expenses. However, they can take a up to 4 weeks for approval and will create a lien on the borrower’s home.
- Fixed-rate personal loans are growing in popularity faster than any other debt vehicle (see image below). And that’s no surprise to us. Personal loans allow you to consolidate other debts into one easy payment and circle the date in which the debt will be paid off, usually within 4 years. Be sure to do your research as some companies (but not LendingPoint) will require you to secure a portion of your loan with a car.
We know your time is valuable. Our goal is to provide you with usable financial tips with an easy to implement approach. Thank you for reading.
Happy New Year and happy saving!