Money Management

A health savings account can come in handy for all kinds of medical expenses. Keep reading to learn whether an HSA can defray the costs of COVID-19. 

Here comes yet another COVID-19 winter — are you prepared? I just got the latest booster shot, and my supply of KN-95 masks is still robust, so I think I’m as ready as I can be. Thankfully, my personal finances are in a good place these days, because COVID-19 can be expensive in a few different ways.

The Ascent’s research team found earlier this year that Americans changed financial priorities as a result of the pandemic, with 40% of those surveyed opting to spend more on goods and services rather than saving money.

Given the extreme impact COVID-19 had (and continues to have) on our daily lives, this isn’t so surprising. But if you’re concerned about medical expenses and you qualify for a health savings account (HSA), I have some good news for you: Your HSA can help you cover costs.

What can an HSA do for you?

Not all health insurance plans will give you access to an HSA. In 2023, your health insurance plan must have a deductible of at least $1,500 ($3,000 for family coverage) and an out-of-pocket maximum of $7,500 ($15,000 for family coverage). With these qualifications, you can open a health savings account and contribute up to $3,850 ($7,750 for a family) for the year. This money is pre-tax, so it can reduce your taxable income. You won’t have to pay taxes if you make withdrawals for qualified medical expenses, and your money can even be invested and grow tax-free.

HSA funds can be used to pay for more medical expenses than you may realize, and thankfully, that extends to bills you may incur as a result of COVID-19. Your insurance policy should cover COVID-19 vaccines without any out-of-pocket contributions from you, but since the public health emergency has ended, you’ll need to pay for costs relating to testing and treatment, including prescription medication.

This is where your HSA comes in, as it can be used to cover those expenses. Once you meet your deductible and other cost-sharing obligations, your insurance should pick up the rest of the tab. And if your case of COVID-19 is mild, you can even use HSA funds to pay for over-the-counter medication to help you feel better.

Make these moves to be ready for another COVID-19 winter

Whether you have an HSA or not, there are other things you can do to ensure smooth sailing this winter.

Pad your savings: Having a solid emergency fund is always a personal finance best practice. If your HSA balance isn’t sufficient to fully cover the cost of getting sick (or if you don’t have access to an HSA), an emergency fund can come to the rescue. Save in a high-yield savings account or money market account, so your cash is ready and accessible when you need it.Check your supply of sick days: If you’re lucky enough to work for an employer that grants you paid sick leave, have a look at your balance of days to get an idea of where you stand. If you’re a freelancer like I am and don’t get paid sick leave, it’s worth padding that emergency fund even more to help you cover the bills if you can’t work for a few days while you’re battling COVID-19.Review your health insurance coverage: If you have a high-deductible plan, check just how much of that deductible you have left to cover before additional medical treatment is covered by your insurer. The time to find out is now, before you find yourself facing illness.

COVID-19 is expensive — there’s no way to get around it. USC found that our costs from this virus will reach $14 trillion by the end of this year. Your personal costs will be less than that, of course, but getting sick still has the potential to throw a serious wrench into your finances. Rely on your HSA if you have one, and pad your savings if possible. And don’t forget to check your health insurance coverage to see where you stand as far as your deductible is concerned.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Generational wealth is making it easier for some to buy homes. Read on to learn how you can compete if you don’t have family help. 

Buying a house today can be really hard for those who don’t already own property. In the second quarter of 2023, the median home price hit $416,100. Mortgage rates also recently hit a 23-year high.

With mortgage loans costing more and home prices up, it may feel absolutely impossible to become a property owner. You’ll need a larger down payment and have more money coming out of your checking account each month to afford mortgage payments. And for many young people, it is impossible. But that’s not the case for all young people.

If you’re watching your peers and wondering just how they can actually afford to buy homes, here’s the answer you may be looking for.

Is this the reason your friends can afford to buy a house and you can’t?

According to a recent survey conducted by Redfin, there’s a simple reason why some younger people are able to buy homes while others struggle: Many of those who are purchasing property have family help.

In fact, a shocking 38% of recent home buyers aged 30 or under obtained money from either an inheritance or a gift from family members in order to make their down payment. This family money can go a long way toward making ownership more affordable for a few reasons, including:

A higher down payment makes more mortgage lenders willing to provide loans.Those who manage to make a down payment of 20% or higher can avoid added costs associated with private mortgage insurance.A higher down payment means you can borrow less, which makes monthly payments more affordable.

Plus, of course, it’s almost always necessary to have some money to put down to be able to buy a house at all unless you can qualify for a special government loan like one backed by the FHA or USDA.

Even if you’re putting just 3% down, which is the absolutely bare minimum most conventional lenders would require, you’d be looking at needing a $12,480 down payment to buy a median-priced home. And if you wanted to put down 10% to gain access to more loan options, you’d need about $41,600. That can be really hard to come by without family help.

What can you do if you don’t have family support?

With so many people under 30 getting family help, it becomes even harder for those who don’t have this support to be able to buy homes. That’s because those who get assistance can keep up the demand for starter homes so prices don’t fall. If close to 4 in 10 young people didn’t get this help and no one could pay today’s high prices for starter homes, then costs might come down.

Since that’s not the case, though, the big question is what to do if you don’t have relatives who can help you with a down payment. And you do have a few options, including:

Looking into first-time home buyer assistance programs. Both the government and private lenders do provide special assistance for home buyers who need help buying property. You can check with the Department of Housing and Human Development to find programs in your area. For example, here’s a guide to options in Pennsylvania.Buying a fixer-upper. If you have the knowledge and time, you can buy a cheaper home that needs some updating. You can earn sweat equity. Just be sure you understand what the finished cost and the value of the home will be after you remodel so you don’t overspend.Waiting. There’s nothing that says you have to become a homeowner right now. You can keep saving for a down payment in case you want to buy in the future and rent for a while until mortgage rates come down to a more reasonable level.

The important thing is not to feel bad if it seems like your peers are ahead of the game when buying homes. They may have generational wealth giving them a leg up that you aren’t aware of.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Research shows that those with higher credit scores often have more credit cards. But read on to learn why more cards don’t necessarily equal a higher score. 

Credit cards are an incredibly popular financial tool — 80% of respondents to a recent survey by The Ascent admitted to having at least one. But some respondents had more, and in a particularly interesting finding, the largest percentage (28%) of those with credit scores between 800 and 850 (a FICO® Score in this range is considered “exceptional”) had four or more credit cards. Meanwhile, 43% of those with credit scores of 579 or below (“poor” for FICO® Scores) had zero credit cards.

What’s the relationship there? If you’re trying to boost your credit score, should you add more credit cards to your wallet? Not necessarily.

Correlation does not imply causation

It’s natural to wonder which came first: the higher credit score or the multiple credit cards? But the relationship at play here isn’t a causal one.

People with lower credit scores might struggle to be approved for a credit card, while those with higher credit scores can be approved with ease. People with higher credit scores likely also have a longer credit history, which translates to greater ease in getting credit card approvals and also a higher level of comfort using credit cards and managing those accounts.

What impact do credit cards have on your credit score?

Having more credit cards can improve your credit score. Let’s say you currently have two credit cards: one with a credit limit of $2,500 and another with a limit of $5,000, for a combined total credit limit of $7,500. You’re carrying a balance of $750 on the smaller card and a balance of $2,000 on the larger one, so your total credit utilization ratio across both is almost 37%. Ideally, it’s best to maintain lower credit use — keep your usage to 30% or less of your credit limit to avoid a negative impact on your credit score.

If you apply for a third card and are given a limit of $3,000 on it, you now have a total credit limit of $10,500. And with your existing balances, your credit utilization ratio is now just under 26%. You didn’t pay off any existing debt, but by virtue of increasing your credit limit with a new card, you may see a bump in your credit score.

But beware! Having more credit cards can also pose a risk to your credit score. If you have access to more credit and struggle with overspending, you could end up with higher balances that you have difficulty paying off. And credit card interest is extremely expensive and can grow your existing balances exponentially. As of this writing, the average credit card APR is 28.05%, according to Forbes.

How can you achieve a higher credit score?

As you can see, having more credit cards can give you the chance to improve your credit score, but if you’re not careful, it can have the opposite effect. So if your credit score could use some help, try these moves rather than rushing to apply for new cards.

Pay your creditors on time: Payment history makes up the biggest percentage of your FICO® Score, at 35%. It is crucial that you prioritize making those credit card and loan payments on time every month. This tactic was the cornerstone of how I repaired my credit in the wake of the short sale of the house I used to own. It works.Comb through your credit report for errors: You can get a free copy of your credit report every week through the end of 2023. So jump over to AnnualCreditReport.com and get your reports. If you find errors (like accounts that don’t belong to you), you can have them removed by the credit bureau, boosting your score.Pay down existing debt: Paying off debt is hard, but it’s worth it. I raised my credit score by 100 points in less than a year over the course of paying off many thousands of dollars in debt. The second-largest factor for your FICO® Score (30%) is your amounts owed, so if you can chip away at your debt, you’ll see a positive effect on your score.

Credit cards are absolutely useful and can certainly give you the opportunity to improve your credit score. But don’t assume that having more of them is always the key to better credit.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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SNAP is designed to help Americans pay for nutritious food, but the program can be confusing. Here, we lay out the facts about SNAP. 

The Supplemental Nutrition Assistance Program (SNAP) is designed to help low-income households supplement their grocery budgets so they can afford nutritious food. Roughly 12.5% of the U.S. population receives SNAP assistance. Whether you’re new to the program or you’ve received SNAP benefits for years, you may have questions. Here, we answer some of the most commonly asked.

Who’s eligible for SNAP benefits?

There are two ways SNAP eligibility is determined: Traditional or categorical.

Traditional: Based on household gross income, net income, and assets. Gross household monthly income (the amount you earn before taxes and other deductions are taken) cannot be over 130% of the federal poverty level (FPL).

Net household income (the amount of money you bring home) cannot be over 100% of the federal poverty level. For example, the FPL for a family of four in 2023 is $30,000. To be eligible for SNAP, you would need a net income of $60,000 or less.

Categorical: If an applicant is a participant in Security Income (SSI), Temporary Assistance for Needy Families (TANF), or General Assistance (GA), they are automatically eligible for SNAP benefits.

Here are the Federal Poverty Level (FPL) figures for 2023:

Are there any work requirements?

Yes. Work requirements to qualify for SNAP benefits include registering for a job with a state employment office, accepting a job if you’re offered one, and fulfilling the job search or training requirements as laid out by your state SNAP agency. These requirements do not apply to older adults or people with disabilities. And it’s important to note that college students and non-citizens are not typically eligible for SNAP benefits.

How are SNAP benefits distributed?

SNAP provides eligible households with a monthly electronic benefits transfer (EBT) card. An EBT card functions like a prepaid card. In other words, when shopping at an eligible, licensed retailer, you swipe the card to make payment. And like a traditional debit card, the amount spent is deducted from your balance.

Does the government ever raise the amount SNAP recipients receive?

The government’s fiscal year (a fiscal year is the government’s one-year accounting period) begins on Oct. 1. At that time, SNAP eligibility and maximum benefits are among the adjustments that are made. The goal is to help those without enough in their bank accounts get the assistance they need.

I’ve been hearing about SNAP scams. What can I do if I’m a victim of a scam?

All states are required to reimburse SNAP beneficiaries for up to two months of benefits twice a year. Even though you should be reimbursed if you’re scammed, taking steps to protect yourself before a scam occurs is definitely your best option. For example, if you receive a text message from someone saying that your EBT card is locked, ignore it. The text will tell you that you must call a specific number for assistance unlocking the card. Once you do, the person on the other end will ask for personal information. If you provide them with personal information, it will be used for identity theft or another type of fraud.

If you need help stretching your budget to buy nutritious food, SNAP can help. The first step is to find the SNAP offices in your state by going to the U.S. Department of Agriculture (USDA) site.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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