Money Management

HSA balances are climbing. Read on to see why these accounts are so valuable. 

Healthcare is one of those expenses you often can’t avoid. And you might incur large medical bills at any time.

Even if you’re young and healthy, you never know when an injury might land you in the ER, leaving you to raid your savings account (or, worse yet, rack up debt) just to cover your costs. That’s why it really pays to fund an HSA, or health savings account, if you’re eligible to.

The average HSA balance during the first six months of 2023 was $4,397, according to recent data from Bank of America. And if you’re eligible for an HSA this year (more on that below), it pays to contribute as much as you can. Here’s why.

1. You get tax-free contributions

Many people are familiar with the concept of tax-free contributions to an individual retirement account (IRA) or 401(k) plan. HSAs work the same way.

This year, the limit for HSA contributions is $3,850 for individuals and $7,750 for families. So if you max out as a person with self-only coverage, you’ll avoid paying taxes on $3,850 of earnings. If you fall into the 24% tax bracket based on your income, that results in actual savings of $924.

2. You get tax-free investment gains

You may be familiar with flexible spending accounts, or FSAs, which also let you set aside money for healthcare on a tax-free basis. But despite their name, FSAs aren’t very flexible. They generally require you to spend down your entire balance within your plan year or risk forfeiting some of your money.

HSAs don’t make you do that. You can carry funds forward as long as you want, and you can invest the money you don’t need right away. Better yet, you get to enjoy tax-free gains on your HSA investments.

3. You get tax-free withdrawals for medical expenses

A big benefit to saving for retirement in a Roth IRA or Roth 401(k) is that your withdrawals from your account are tax-free. The same holds true for HSA withdrawals taken for medical expenses.

Now, if you remove funds from an HSA for non-medical purposes, you’ll not only be taxed, but also penalized. However, that penalty goes away once you turn 65. At that point, you can remove funds from an HSA for any purpose without a penalty, which means that account can serve as a backup retirement plan of sorts.

It pays to contribute to an HSA

Having money in an HSA gives you a means of paying for healthcare expenses when they arise out of the blue. Plus, you get to enjoy the tax benefits listed above.

The only thing you’ll need to be mindful of is that your health insurance plan must conform to certain rules for you to be able to participate in an HSA. This year, your plan may qualify if you have an individual deductible of $1,500 or more, or a family-level deductible of $3,000 or more. Your plan must also come with an out-of-pocket maximum of $7,500 or less for self-only coverage and $15,000 or less for family coverage.

If your health plan is HSA-compatible, then it pays to sign up, even if you can only contribute a few hundred dollars a year. And if your employer doesn’t offer an HSA, don’t sweat it. As long as your health coverage renders you eligible, you can open an HSA independently through a bank or credit union that offers one and start reaping the benefits detailed here.

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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.Bank of America is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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It’s embarrassing to have your credit card denied — especially when you didn’t do anything wrong. Read on to see why that’s happened to me on multiple occasions. 

One of the joys of being a parent is getting nominated to serve as Class Mom and being tasked with coordinating teacher gifts during the holidays and end of the school year. Now, I don’t mind serving in this role. I’m grateful for everything my kids’ teachers do for them, and since I know I’m organized, I feel as if I’m well-suited for the job.

But in the past year, I’ve run into an annoying issue with my credit card when buying teacher gifts. Thankfully, I’ve also managed to find a workaround.

When your credit card gets flagged for fraud

The average teacher’s salary in the U.S. is $57,086, according to Salary.com. Of course, some well-paid teachers out there earn a lot more. But for the most part, teaching isn’t exactly a lucrative profession. I realized long ago that when it comes to class gifts, teachers don’t really want personalized mugs filled with candy or tote bags stuffed with body lotion. They want cash.

At times, I’ve contemplated sticking actual bills in an envelope and handing it over. But I feel like that’s not so classy. So instead, I’ve taken to purchasing Visa gift cards for my kids’ teachers as class gifts. Those gift cards function virtually like cash, and I figure the teachers I give them to can spend them on anything from household supplies to restaurant meals.

Here’s the problem with buying gift cards, though. When you purchase a bunch at the same time, it tends to look suspicious — so much so that your credit card might get denied.

This very thing has happened to me multiple times over this past year. The last time it happened, I was in a long line at CVS trying to check out quickly to make it to school in time for pickup.

My first two gift card transactions went through without an issue. But the third one was denied. So I had to call my credit card company right there in the store and ask them to unfreeze my card. It was kind of embarrassing, and I felt bad for the people behind me I was holding up.

A better idea for the future

The routine of having my credit card denied due to buying gift cards has gotten really old for me. So what I plan to do next time is contact my credit card company before making those purchases to let it know. That way, those transactions are less likely to come up as fraudulent.

It’s the same concept as telling your credit card company when you’ll be traveling. Years back, my credit card got denied at a supermarket in Massachusetts because I’m from New Jersey and it seemed unusual for me to be buying groceries in a state a few hundred miles away. I had to call my credit card company on the spot and explain that I was traveling, and that was a hassle.

Now, I just contact my credit card company before taking a trip to let it know to expect charges in a different ZIP code. And I can do the same before making a series of gift card purchases.

If you’re going out to buy a single gift card, you can rest assured that you probably won’t have an issue. It’s really only when you’re buying multiple gift cards one after the other that a problem tends to arise. But if you’re Class Mom like me and ever have to buy a bunch of gift cards in one fell swoop, you may want to call your credit card company beforehand to save yourself the aggravation.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.

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Although mortgage rates are high right now, buying a house is the right decision for our family. Discover why it might be worth taking on a more costly mortgage. 

I am buying a home very soon. I am doing this despite the fact that mortgage rates are pretty high right now. As of the week of Sept. 7, 2023 the average rate on a 30-year fixed rate mortgage was 7.12%, while the average rate was at 5.89% as of Sept. 8, 2022 and 2.88% as of Sept. 9, 2021.

I am well aware that mortgage rates are not very competitive at the moment, since I write about this topic just about every day. And I’m not very happy about paying such a high interest rate when I buy my house (who would be?!). But, despite my dismay at all of my hard-earned cash that’s going to end up in my mortgage lender’s pocket, I’m moving forward anyway.

Here’s why.

It’s the right choice for my family

The biggest reason why I am moving forward with buying a home despite high mortgage rates is because it’s the right thing to do for my family.

We want to live in a particular neighborhood where rental properties that are large enough for our family are not readily available. Our son will be starting school next year, and we want to be settled in our home and not have to move again.

The reality is, buying a home is both a financial and emotional choice as well as a lifestyle decision. We want to get our kids settled into a place where we can set down roots and we are willing to pay a premium in the form of higher rates so we don’t have to put that off.

If you are in a position where you want to become a homeowner, putting this dream on hold in hopes of better future rates (which may not come any time soon) doesn’t necessarily make sense. You can’t always delay living the life you want just because it’s not the optimum time to make a purchase.

I can afford it

While I don’t want to put off homeownership, as I mentioned above, there’s also another crucial factor in play here. I can afford to buy my house despite the fact that rates are pretty high right now. And I wouldn’t be moving forward if this isn’t the case.

I was able to sell my prior home for a pretty good profit so I’m making a generous down payment on this house. I also bought a property that was well within my home-buying budget. So despite the fact rates are high, I’m not compromising my security — or my other financial goals — to be able to buy.

No matter how eager you are for homeownership, you absolutely should not move forward if doing so would be a financial strain. If your total housing costs would be more than 25% of your income, you may not want to move forward with the purchase. You could find yourself house poor, devoting so much of your income to your housing costs that doing other important things isn’t possible.

I hope to refinance soon

Finally, the last big reason I’m OK with buying a house at a bad time for mortgage rates is because I know I’m not stuck with this loan forever.

If I get lucky and rates go down, I can — and will — refinance my mortgage and take advantage of it. But if rates end up going up instead, I’ll already have my loan locked in and I won’t have to worry about it.

If you’re put off by today’s high rates, remember that you’re taking a one-way risk when you buy now. You get to make your loan cheaper if rates fall, but your rates won’t increase once you have your loan (unless you got an adjustable-rate mortgage). By acting now, you protect yourself against future possible rate increases while preserving the chance to get a more affordable loan later.

Buying a home may not be the best choice for you in this climate. But if you have money for a down payment, your credit score is in good shape (around 700 or higher so you can qualify for the best rates on offer now), and your housing costs won’t be more than 25% of your income, don’t let today’s rates scare you into putting your homeownership dreams on hold.

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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.
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Spending money at restaurants was something I just didn’t want to give up. Here’s a different approach I took to help me stay within budget. 

Dining out is something many people do at least on occasion. The Bureau of Labor Statistics reports mean annual spending on food away from home at $3,639 per consumer unit.

In my household, we spend a little more than this because we really enjoy trying out new restaurants. For a long time, I fought against this and tried to cut my spending in this area by setting budget limits. But I found that I almost always went over the amount I’d allocated for myself, especially if there was something unique happening like an invitation to a tasting dinner at one of my favorite restaurants.

After dealing with this problem for quite a while, here’s what I ultimately ended up doing to balance out my personal finances.

How I solved my problem of spending too much on dining out

After trying hard to stick with a strict budget for dining out, I decided it just wasn’t working. Since I was taking more than planned out of my bank account each month, I was left scrambling to make up the difference. After all, I definitely didn’t want to go into credit card debt for restaurant spending. That would have forced me into paying interest and spending even more on my habit.

So instead, I decided I was just going to dramatically increase my budget for restaurant spending so I could enjoy all of the special meals I wanted — and then make big cuts elsewhere in things I did not care nearly as much about.

I slashed my spending on clothing to almost nothing (I work from home, so who really cares if I have fancy fashion), my husband opted to drive a cheap used car instead of a new one (he doesn’t drive the kids around, and he doesn’t care about vehicles very much), we switched to a less expensive cellphone plan, and we made cuts to our entertainment budget (we’re old and boring now anyway, so Netflix at home is often more attractive than a night on the town).

Now, I realize I was lucky to have other things in my budget that I could cut. Not everyone does, especially if you’re living paycheck to paycheck. But I did go over my spending list with a fine-tooth comb, tracking exactly where my money was going so I could find the money to free up to make dining out more possible.

You can find ways to adjust your spending

If you want to keep your total spending in check, you don’t necessarily need to get hung up on limiting yourself in all categories — which is the mistake that I was making. You just need to make sure your total spending doesn’t go above a reasonable limit (typically, about 30% of your income is OK for discretionary expenses, with 50% going to fixed costs and 20% to savings).

There’s no right way to allocate your discretionary spending, and if you decide you want to splurge on dining out or shoes or Lego figurines and be stingy on everything else, that’s OK — even if, on paper, it looks like you’re going way overboard on a single category. It’s your money and only you know how to spend it in a way that makes you the happiest.

So if you have something you love and want to spend more on it, go ahead and take a look at your budget today to see if you can make that happen. Then enjoy that activity guilt-free since you’ll have made the sacrifices necessary to enable you to do so.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

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A study found that men and women have different minimum salary requirements for accepting a new job. Find out how much money the average woman will accept. 

A recent study from The Federal Reserve Bank of New York found that women will accept a salary of nearly $25,000 less than men when accepting a new job offer. The study examined consumers’ experiences and expectations regarding the labor market. Men and women have much different minimum pay expectations. We’ll break down some of the study findings below.

Workers will accept as little as $78,645 to take a new job

The Federal Reserve Bank of New York recently released the findings of its July 2023 SCE Labor Market Survey. As part of the study, respondents were asked to provide their reservation wage, which is the lowest wage they would be willing to accept for a new job.

On average, respondents were willing to accept a new job offer with a salary as little as $78,645. This is significantly higher than the July 2022 report, which found that the average reservation wage respondents would be willing to accept for a new job was $72,873. Rising living costs could be one major factor for why workers are seeking more money.

Women will accept a salary as low as $66,068

The study also broke down the average reservation wage for men and women. For women, the average lowest wage they would be willing to accept for a new job offer is $66,068. But for men, the average lowest wage they would be willing to accept for a new job offer is $91,048. That’s a yearly salary difference of almost $25,000.

Is the gender wage gap to blame?

So, why are women willing to accept a lower salary than men? The gender wage gap likely plays a part. Unfortunately, there is still a noticeable gender wage gap in the United States, and it greatly impacts the bank accounts of women.

According to the Pew Research Center, American women typically earned $0.82 for every $1 that men made. The wage gap hasn’t changed much in the last 20 years. In 2002, women earned $0.80 for every $1 earned by men.

Considering this data, many women may have lower wage expectations due to their previous salary experiences. They may have received similarly low-wage offers in the past and assume that employers aren’t willing to pay much more. They may have also been denied higher pay when fighting for a raise or negotiating for a higher salary offer previously.

It’s also likely that many women aren’t aware of how much money their colleagues make. Having open discussions with friends, family, and coworkers can be an excellent way for both women and men to understand current average salaries better so they can push for higher pay and get paid their worth. It pays to gather more knowledge.

Be willing to negotiate when receiving a job offer

The first salary offer you receive may not be the maximum amount an employer is willing to pay you for a job. Before discussing salary with a potential employer, it’s worthwhile to research current salary ranges for similar roles.

Once it comes time to discuss pay and benefits, negotiating can help you get closer to your wage goals. It’s worthwhile to put in extra effort to negotiate higher pay because a higher salary can significantly impact your personal finances.

Are you looking for a new job and want to ensure you get paid your worth? Here are a few tips to help you negotiate higher pay. If you feel uncomfortable negotiating salary, consider practicing the discussion with a close friend or family member to feel more prepared.

But most importantly, don’t give up as you continue your job search. There is well-paying work out there, and you deserve to be paid a salary that comfortably covers your living expenses.

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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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The housing market still lacks inventory. Read on to see how you can work around that in your home search. 

Buying a home today is far from easy. Not only have mortgages gotten expensive, but a glaring lack of inventory is leaving buyers with few options.

As of late July, there was a 3.3-month supply of available homes on the U.S. market, according to the National Association of Realtors. For context, it can often take a six-month supply of homes to balance the housing market and satisfy buyer demand in full.

But while it may be challenging to find a home in a low-inventory market, that doesn’t mean it can’t be done. Here are three steps you can take to find a home when there are few properties to choose from.

1. Separate your must-haves from the features you merely want

If you’re going to be taking on the expense of a mortgage payment, not to mention other costs like property taxes, then it’s natural that you’d want a home that meets your needs and wants. But given the lack of inventory today, a better bet may be to whittle down your list of must-haves and focus on those rather than go after every single feature you’d like your home to have.

For example, if you have multiple children and you work from home, you might need a minimum of four bedrooms to accommodate all of that. Meanwhile, you might want an updated kitchen. But remember, a kitchen is something you can renovate down the road. You can’t easily build extra bedrooms if the square footage just isn’t there.

Focus on the things you absolutely have to have in a home, and be willing to forgo some features or remodel your way into them over time as money allows.

2. Have a strategy for a bidding war

Given the state of the U.S. housing market, it’s somewhat likely that you’ll end up having to duke it out with another buyer, or set of buyers, over the same home. But it’s important to go in with a strategy in that situation.

You may, for example, want to make your second offer a lot higher than your first to scare competing buyers away. So if the home you’re trying to buy is listed for $500,000 and you’re initially outbid with an offer of $510,000, you may want to go to $550,000 on your next bid.

Chances are, if the bidding war continues, the price will reach that point anyway. This way, you’re controlling the bidding and potentially scaring your competition off so the price doesn’t rise even higher.

It’s also important to come up with a maximum offer you’re willing to make. If you know you can’t afford to spend more than $565,000 on a home, that has to be the highest you’ll go.

3. Team up with a well-connected, seasoned real estate agent

As a buyer, there’s no cost to you to work with a real estate agent. So you might as well find one who’s experienced and well-connected in the neighborhood you’re looking at.

With the right agent, you might learn about new listings as soon as they hit the market. You might even get hooked up with pre-market listings so you can scope them out before other buyers get a look. And the more available properties you get access to, the greater the chances of finding one you’re interested in buying.

It’s not easy being a buyer in today’s real estate market. But if you follow these tips, you might manage to find a great home despite inventory being so low.

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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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