Money Management

Worried about healthcare bills? Read on to learn about an account that could lower your costs with tax savings. 

The frustrating thing about healthcare bills is that they can arise when you least expect them. Even if you do a good job of taking care of your health, you never know when an illness or injury might strike.

It’s not so shocking, then, to learn that 27% of Americans consider healthcare costs to be a big risk to their financial security and well-being, according to the latest New York Life Wealth Watch survey.

If you’re worried about medical bills impacting your finances, there are steps you can take to make it less likely that they’ll end up driving you into debt. For one thing, you could pad your savings account so you have cash reserves to tap when healthcare bills arise.

But if your health insurance plan is compatible with a health savings account, or HSA, then it pays to participate. Doing so won’t lower your healthcare costs, but it will help you save money on taxes in the course of paying for medical care.

How HSAs work

An HSA is a savings account that’s designed to help you cover near- and long-term healthcare expenses. Contributions to HSAs go in tax-free, the same way traditional IRAs and 401(k)s are funded with pre-tax dollars. So if you put $1,000 into an HSA, that’s $1,000 of income the IRS won’t tax you on.

You can take an HSA withdrawal at any time to pay for medical expenses. And you also don’t have to use up your plan balance every year.

One great thing about HSAs is that they allow you to invest funds you don’t need right away to grow your balance into a larger sum. Investment gains in an HSA are tax-free, as are withdrawals from an HSA, provided that money is used for qualifying medical expenses.

Are you eligible for an HSA?

HSAs are a pretty great savings tool, but there’s one problem — not everyone is eligible. To be able to fund an HSA, your health insurance plan might conform to certain rules that change annually.

For one thing, your health insurance plan has to have a minimum deductible. This year, it’s $1,500 for individuals and $3,000 for families.

Your health insurance plan also has to have a limited out-of-pocket maximum. This year, it’s $7,500 for individuals and $15,000 for families.

It may be that your HSA eligibility changes from one year to the next. It really all depends on your health insurance plan. If you get your insurance through an employer, someone in your benefits department should be able to tell you if your plan is HSA-compliant.

Many employers offer HSAs that employees can sign up for. But if your employer doesn’t make one available to you, you can open one independently.

Healthcare costs have the potential to wreak havoc on any budget. Boosting your savings can help you avoid debt when medical bills pile up. But if you’re eligible for an HSA, then you might as well fund one of these accounts and enjoy the tax savings a regular bank account won’t be able to give you.

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Need money in a pinch? Read on to see why a personal loan could be your best option. 

There may come a point when you need money and can’t afford to wait to get it. If your car needs a major repair and you need to drive to work, for example, then fixing it immediately is imperative. The same holds true for addressing a major repair in your home.

You have several loan options when you need to borrow money. If you own a home, for example, you could take out a home equity loan and access the sum you need. But a personal loan could be a smarter bet when you need money in a hurry.

It’s all about getting that money in your hands

Discover says that the typical home equity loan takes about 55 days to close on from the time of an application. If you’re taking out a home equity loan to do something like finish your basement or put in a pool, that may not be a problem, since you’re addressing a want, not a need.

But if your roof has a problem or your heating system has gone kaput and you need thousands of dollars to fix the issue, you probably can’t afford to wait 55 days, or somewhere in that vicinity, to get access to money. Rather, you might need that money yesterday.

That’s why a personal loan could be a far more optimal solution. Rocket says that most banks and credit unions can close on a personal loan in one to seven business days. But in some cases, you may be eligible for same-day financing. Even if that’s not the case, and you have to wait a few days to get your personal loan proceeds, that’s far better than having to wait almost two months.

It still pays to shop around for a personal loan

When you have an urgent need to borrow, you need an option that will put cash in your hands quickly. And a personal loan fits that bill.

But it still pays to take a day to shop around for personal loan rates and see which lender comes back with the most competitive offer. The lower the interest rate on your loan, the less your monthly payments are going to amount to.

Now, your credit score is going to play a big role in determining what personal loan rate you’re offered. These loans are unsecured, so lenders rely on borrowers’ credit profiles very heavily when setting rates. But if your score is in good shape, then you may be eligible for an affordable rate that keeps your loan payments manageable.

It’s never fun to land in a situation where you need money and can’t afford to wait. A good way to avoid that sort of scenario is to maintain a fully loaded emergency fund.

But if you wind up in a pinch without cash reserves to tap, then you may have to look to borrow. And a personal loan could not only be your most affordable option in that case, but also, your fastest.

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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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You might think retiring with a lot of money is impossible on a $50,000 annual wage. Read on to see why you’re wrong. 

Americans believe it will take $1.27 million in savings to retire comfortably, according to recent data from Northwestern Mutual. And if you earn $150,000 a year, it may be more than possible to grow an IRA or 401(k) balance that large.

But what if you only earn $50,000 a year and you don’t expect your wages to change substantially in your career? You might assume a $1 million nest egg is off the table. But here’s why you’d be wrong.

It’s all about starting early and investing savvily

If you wait until your 40s or 50s to start saving and investing for retirement, then you might struggle to accumulate $1 million or more — especially on a $50,000 salary. But if you begin saving and investing at a much younger age, things look very different.

Many people start working full time in their early 20s. Now, it may not be feasible to start saving for retirement right away, since you might have credit card debt to pay off and an emergency fund to build. But let’s say you’re able to start saving for retirement at age 25. If you don’t retire until 65, that gives you a 40-year window.

Meanwhile, the way you invest your money could dictate how likely you are to get to $1 million. Some people shy away from investing in stocks because of the risks involved. But you should know that over the past 50 years, the stock market has delivered an average annual 10% return before inflation, as measured by the performance of the S&P 500. So if you invest your retirement savings in stocks over multiple decades, there’s a good chance you’ll get to enjoy a similar return.

Now, let’s talk about retirement plan contributions. If you earn $50,000, you’re probably not going to sock away 15% to 20% of your earnings. But what if you were able to save 5% of your income, or $2,500 a year, over 40 years? In that case, assuming a 10% yearly return, you’d end up with a nest egg worth $1.1 million.

Getting to $1 million can be done, but it won’t be easy

Clearly, it’s possible to retire a millionaire on a $50,000 salary. But that doesn’t mean it’ll be easy. Parting with $2,500 a year isn’t as big a sacrifice when you earn $100,000 or more. But when you earn $50,000, it’s a lot of money to give up spending.

Contributing $2,500 to an IRA or 401(k) every year could mean passing up the opportunity to upgrade your car or upsize your apartment. It could also mean spending less money on leisure and being more careful about the purchases you make.

But if you want to retire with a nice pile of money and enjoy a comfortable lifestyle as a senior, then those sacrifices are worth making. And who knows? In time, you could end up with far more wealth than many of your peers, even if their salaries are double or triple what yours is.

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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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Stocking your classroom? Read on for ways to spend less this year. 

The average public school teacher in the United States earns an annual salary of $56,937, according to Salary.com. And while some educators bring home a higher paycheck, for the most part, teaching is generally not considered to be a particularly lucrative profession.

What makes things even tougher for teachers is that many have to cover the cost of classroom supplies on their own. The National Education Association reports that well over 90% of teachers pay for classroom materials out of pocket. And this year, teachers are expected to spend an average of $820 on classroom supplies.

Meanwhile, teachers can claim a deduction on their taxes for educator expenses. But this year, that deduction maxes out at $300 per person. Given what the typical teacher is expected to spend, there’s clearly a huge gap. And even so, a deduction won’t give you all of your money back — just a portion in the form of tax savings.

If you’re a teacher, now’s the time when you may be at risk of racking up large credit card bills to prepare your classroom for the upcoming academic year. But these moves might help you reap some savings.

1. Hit the dollar store

There’s no reason to spend $3 to $4 on a box of crayons at Target when you can buy a similar box at the dollar store for, well, $1 (or in some cases, just over $1). There’s a good chance that many of the items you need for your classroom are available at the dollar store, but shop there early — before all of the other teachers in your area empty the shelves.

2. Take advantage of teacher reward programs

Some stores, like Staples, offer special reward programs for teachers that allow you to earn cash back on your purchases. In fact, Staples has a program where parents can shop and earn rewards for the teacher of their choice. Encouraging the families in your class to sign up could result in cash you can use to restock your classroom during the year as needed.

3. Ask for donations to build a free classroom library

Many teachers maintain a classroom library so students have books available to read during quiet periods or bring them home as part of different homework assignments. But it costs money to buy books, even if you purchase them used.

Before you spend a fortune on books for your classroom, ask the parents in your classroom if they have unwanted books you can have. And ask your friends who are parents as well. If you’re a first grade teacher and have friends with third and fourth graders who don’t have younger siblings, they may be more than happy to unload the extra books that are just sitting in their garages in boxes.

Some local libraries partner with schools to recycle older books, too. It pays to reach out and see what’s available.

Teachers give a lot to their students — and that includes some of their pay. If you normally spend a lot of money on classroom supplies, be sure to see if these tips lead to some savings.

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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 credit repair industry will be worth more than $6 billion in 2023. Learn more about what credit repair companies can — and can’t — do for you. 

Your credit score can affect many parts of your life. For starters, having good or excellent credit can help you land more favorable interest rates on borrowing or qualify for a credit card with better rewards. Over time, this can have a big impact on your finances.

Let’s take just one example: Say you want to take out a personal loan of $5,000 with a three-year loan term. If your credit is outstanding, you might qualify for a loan with an APR of 10%, which translates to around $800 in interest. In contrast, if your credit score is subpar, you may wind up paying upwards of 30% — if you can qualify for a loan at all. That could mean almost $2,650 in total interest payments. In that scenario, a significantly lower credit score would cost $1,850 more in interest over the term of the loan.

But it goes beyond mortgages, other loans, and credit cards. Your credit can also come into play in insurance premiums. Landlords may look at your credit score when deciding whether to rent you an apartment. Employers sometimes even consider it when you’re applying for a job. With so much riding on one number, it’s not surprising that there are over 40,000 companies offering credit repair in the U.S. According to IBISWorld, the industry’s expected to be worth $6.6 billion this year.

What can cause a low credit score?

Your credit score is a bit like a grade you’d get in school, only in this case it reflects your ability to manage borrowed funds. A FICO® Score between 300 and 649 is generally considered to be poor or fair. According to The Ascent credit card research, around 25% of Americans fall into this category.

One big factor in calculating your score is payment history — essentially, whether you pay your bills on time. Even one late payment can have a big impact on your score. If there are financial skeletons in your closet, such as a bill you never paid or a loan you defaulted on, this can weigh heavily on your credit for some time. Negative information can stay on your credit report for seven years, and bankruptcies even longer.

Another important factor is the amount you owe. Put simply, if you owe a lot of money it might be a sign that you’re struggling to cover your day-to-day costs, making lenders cautious about lending you more. There are other factors such as the length of time you’ve had accounts and whether you have a mix of types of debt.

READ MORE: The Complete Guide to Your FICO® Score

Can a credit repair agency improve your score?

There are times when the right credit repair agency could help improve your score. But if there is accurate negative information on your credit report, no company can simply wave a magic wand and get rid of it. Indeed, if a company is promising to do this, be highly suspicious as it could be a scam.

What a credit repair agency can do is help you understand what’s causing your credit issues and potentially negotiate on your behalf. It can also help you to challenge inaccurate items on your credit report that could be pulling your score down. Even then, be aware that fixing your credit could take years, with or without an agency’s help.

The trouble is that some credit repair agencies engage in less-than-ethical and even outright illegal practices. For example, according to Equifax, some fly-by-night companies encourage people to lie on credit applications. Others may try to get you to hide negative information by getting an Employer Identification Number (EIN) from the IRS and using that as a type of clean slate. In itself, getting an EIN isn’t illegal, but getting one under false pretenses is.

The biggest reason not to pay a credit repair agency is that you can take all the same steps for free. Many credit repair agencies charge upward of $70 a month, which can put a serious dent in your monthly budget. If part of the reason your credit score isn’t stellar is that money is tight, you may be better off going it alone.

You can repair your credit on your own

Rather than shelling out your hard-earned cash, there are ways you can repair your credit yourself. Importantly, you’ll be in the driving seat which means you’ll know what’s being done in your name. Start by learning as much as you can about how credit works. The more you understand, the better able you’ll be to manage your credit.

Here are some steps you can take:

Get a copy of your credit reports from all three credit bureaus. Normally, you’re entitled to one free credit report from each agency every year, but pandemic provisions mean you can get free weekly reports until the end of the year. Go to annualcreditreport.com to get yours.Check your reports carefully. Look for any inaccurate information that could be dragging your score down. If you find anything, contact the credit bureau to dispute the information. You may also be able to negotiate with creditors — if you can settle the account, they may agree to remove the negative line from your report.Get up to date on your payments. Paying bills on time is a surefire way to build credit. It isn’t always easy, particularly if you’re living paycheck to paycheck.

Bottom line

Reputable credit repair agencies can help you to repair your credit. But given the high costs and the fact that you can take the same steps for free, why not put that money towards other financial goals?

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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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