Money Management

A writer pushed herself to add a very specific sum to her savings account. Read on to see why. 

For many years, my family and I were quite spoiled in that we had a health insurance plan that wasn’t subject to an in-network deductible. But our health insurance plan changed late last year, and as a result, we’re now looking at a $3,000 deductible we have to meet before our insurer will pick up the tab for our care.

Because I have kids and we tend to see a host of medical bills, I had a feeling we’d be meeting that deductible at some point during the year (I believe we actually hit it in June). And it’s for this reason that I specifically added $3,000 of my earnings to my savings account earlier in the year. I wanted to make sure we had the extra money to cover our deductible.

Here’s the thing, though. I actually have more than $3,000 sitting in my HSA. And since I’m allowed to tap that account at any time to cover qualified medical bills, I technically didn’t need to add that $3,000 to my savings. But here’s why I did so anyway.

It’s all about reaping the long-term benefits

HSAs allow you to invest money you don’t need immediately so you can grow your balance into a larger sum over time. And investment gains in an HSA are tax-free, just like gains in a Roth IRA. That’s a huge benefit.

Because of this, my goal is to leave my HSA untapped as long as possible. The way I see it, if I’m able to pay for near-term medical expenses by taking money out of my savings, I can continue to invest my HSA and enjoy tax-free growth. My goal is to carry a balance with me into retirement, because medical costs tend to increase during that stage of life.

Now, by taking money out of my savings account, I do forgo interest on that sum. And right now, I’m earning over 4% interest on my money, so it’s not a negligible amount.

However, over the past 50 years, the stock market’s average return has been 10% before inflation, as measured by the S&P 500. So if I’m able to get that same return in my HSA, then it makes sense to take money out of my savings and leave my HSA untouched.

Even if I don’t manage to score an average yearly 10% return in my HSA, I might get close. And I’d rather earn, say, 8% on my money than the 4% I’ll get from my savings account.

Plus, the IRS is going to tax me on the interest I earn in my savings account. It won’t tax me on HSA gains, which is one of the main benefits of having one of these accounts in the first place.

A strategic decision

Adding an extra $3,000 to my savings earlier this year meant having to take on more work and sacrificing some free time. It may seem silly that I did that given that I have money sitting in an HSA. But clearly, I have my reasons for wanting to leave my HSA alone as long as possible. And if you have an HSA, you may want to take a similar approach.

Of course, if you don’t have the money in savings to cover a medical bill and you have HSA funds at your disposal, then it’s far better to take a withdrawal than charge your expense on a credit card and accrue interest on it. But if you’re able to comfortably withdraw from your savings to cover a medical bill, then it often pays to leave your HSA untapped.

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America is known for its hardworking culture where people put in long hours to get ahead. Read on for tips to strike a better balance between work and life. 

American workers are known for working a lot. With an average of 1,791 hours dedicated to work each year, we surpass virtually every other developed country. But here’s the kicker: We work a whopping 33% more than our German counterparts. However, working fewer hours doesn’t mean a country is less productive. The Germans are just as productive as we are, proving that hours worked don’t always equate to success.

Many Americans complain of burnout, high levels of stress, and little time for their personal lives. How can we achieve work-life balance, given the situation we find ourselves in? We’ll explore how Americans can improve their work-life balance, help boost their financial savings, and achieve a fulfilling life outside of work.

Understand cultural norms

Cultural norms are a significant factor in determining work culture and expectations. Americans, for example, have a reputation for prioritizing work over leisure time. The hustle culture is ubiquitous, with long hours and the pressure to succeed.

On the other hand, many European countries prioritize leisure time, and the concept of “workcations” is prevalent. It’s worth emphasizing that cultural norms are not set in stone and are often subject to change. The key is to understand the ideal work-life balance for various cultures and determine how to adapt it to one’s circumstances.

Be intentional with your time

One of the biggest problems with work in America is that it is seemingly never-ending. We work long hours and still take work home. We need to be intentional with our time, setting clear boundaries between work and personal time.

A great way to do this is to create a schedule that works for you. Set aside a few hours for yourself each day to enjoy hobbies, exercise, relaxation, or time with family and friends. We need to intentionally block off and set aside time for our personal life with the same dedication and commitment we give to our jobs.

Set priorities

Feeling overwhelmed with a busy schedule is a common problem in our society. The key to achieving a work-life balance is to prioritize the activities that are most important to you. Consider what activities make you happy, make time for them, and make them a priority.

It’s important to re-evaluate what is important to one’s personal life. Is it spending more time with family or pursuing hobbies? This self-reflection can help you re-prioritize your lives and spend time doing what you enjoy. It also helps to have an honest conversation with employers about work expectations and opportunities for flexibility.

Make self-care a priority

Self-care is often underrated, but it should be a top priority for everyone. It’s essential to maintain good mental health, physical well-being, and emotional stability. Taking care of yourself, whether through exercise, meditation, yoga, or a walk around the block, can help you recharge and feel more energized.

Making self-care a priority will allow you to be more productive at work and give you the energy to tackle whatever life throws at you.

Set boundaries

One of the main reasons Americans work long hours is that we have a culture of always being available. This is problematic, but we can change it by setting firm boundaries. It’s essential to prioritize your time at work and make sure your colleagues know your working hours.

This way, they will not contact you outside of those hours, and you can dedicate that time to yourself or your family. Setting boundaries also means saying no when you have to. Sometimes, it’s necessary to prioritize your wellness over professional commitments.

Use time management strategies

Another key to achieving work-life balance is mastering time management strategies. One proven strategy is the Pomodoro technique, which involves working for 25-minute intervals and then taking a five-minute break.

This technique has been found to help improve focus and productivity while also ensuring employees take time for self-care. Being more productive is also the key to unlocking better financial management.

Learn to delegate

Another way to achieve work-life balance is to delegate tasks to others. Many Americans believe that asking for help is a sign of weakness, but it’s actually a strength. Delegating tasks, whether at work or home, can help take the load off and make life more manageable.

It’s essential to understand that you don’t have to do everything yourself. Delegating tasks can help you focus on what you do best, which can make all the difference in your professional and personal life.

Take a break

Finally, it’s essential to take a break. America has a culture of constant work, but research has shown that taking regular breaks can make you more productive and focused. Giving yourself a break can help you reduce stress, improve your well-being, and stay motivated.

Take a break, whether it’s a vacation, a day off, or just a few hours to yourself. Time off is important and can help you achieve a better work-life balance.

Bottom line

Achieving work-life balance in America is not easy, but it’s essential. By improving our productivity and efficiency, we can get more done in less time. In turn, this can lead to greater work-life balance and financial success.

These tips will allow you to lead a more fulfilling life, both professionally and personally. Remember to prioritize your wellness and personal life to maintain a balance that works for you.

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A net worth of $1 million at age 30 is an impressive feat. Find out if it’s enough money to retire early or if you should keep working. 

Early retirement has become a popular goal. You don’t have to search long to find all kinds of online communities built around the concept of FIRE, which is short for “financial independence, retire early.”

If you’ve already saved $1 million at 30, you may be wondering if you have enough to retire. No one wants to run out of money because they retired too soon, so here’s what to consider before making that decision.

Is $1 million enough to retire at 30?

A savings of $1 million is quite a bit of money, but it might not be enough to retire at age 30. Instead of retiring, consider working for another five to 10 years to build more wealth first. If possible, you could also see if dialing back your hours is an option, shifting from full-time to part-time work.

It’s difficult to know how much money is enough to retire early. One of the most common guidelines people use is the 4% rule. This rule of thumb essentially states that if you have a balanced investment portfolio, you can safely withdraw up to 4% of that money per year (and make adjustments for inflation). For example, if you have $1 million in investments, you can use up to $40,000 per year. Your portfolio’s returns will, on average, balance out your withdrawals.

Not everyone agrees on the 4% rule. Some say it should be higher, others lower. But it works well enough as a rule of thumb. So, with $1 million in savings, let’s assume you’ll have about $40,000 per year of income in your extended retirement.

Your finances could get tight — especially in your golden years

It could be hard to get by with an annual income of $40,000. The average American household’s expenses are $66,928 per year. And the median income is $69,717. If your spending is anything like the average American’s, then you’ll be well short.

You certainly could live on that much money if you’re careful about your spending. However, you also need to consider that your cost of living may increase more than you expect. Here are a few ways this could happen:

You decide to have kids. The average cost to raise a child is $18,271 per year.There’s a period of high inflation. While the 4% rule accounts for inflation, you’ll still go through your savings more quickly if costs increase much more than usual.You have expensive healthcare costs, which becomes more likely for everyone as they get older.

You may be comfortable enough managing your spending in your younger years. But it’s risky to assume you can be as flexible with your finances for your entire life as you are now.

A low-cost lifestyle could make it work

Being able to retire early also depends on how much money you spend. If you’re comfortable living more economically, or moving to a place where your money goes further, then a nest egg of $1 million could be more than enough.

For example, many remote workers choose to live in countries with a lower cost of living. I’ve lived in Colombia for several years, where you can live comfortably on $2,000 per month or less. While many of these low-cost locations are outside the United States, there are also plenty of affordable U.S. cities to choose from. Moving to a new city is a huge change, but it can help if your goal is to retire early.

You may also be fine if you don’t need much money for your lifestyle and hobbies. Living on $40,000 per year is difficult if you go out often or have large expenses. If you don’t spend all that much, then it’s much easier to make your money last.

Consider working longer for more financial security

Although it’s possible to retire at 30 with $1 million, waiting a little longer will put you in a better position. If you wait another 10 years, invest in stocks, and get an 8% annual return, your nest egg will be worth about $2.2 million — and that’s without adding any more money.

It’s your decision, but the good thing is that this kind of savings gives you lots of flexibility. You could take some time off from work and potentially come back to it later, if you want to, or if you don’t think your savings will last as long as you want. You could also reduce your hours or switch to a remote work arrangement, giving you money to pay your bills while also being able to live how you want. Spend some time thinking about what you want out of life and retirement, and you’ll be able to find the best option for you.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Lower monthly payments might sound nice, but getting a 40-year mortgage could be a costly mistake in the long run. Here’s why. 

With home prices and interest rates skyrocketing, it can be tempting to consider lowering your monthly payment by stretching out your mortgage by another decade. However, there are some serious drawbacks to consider before going all-in on a 40-year loan. Read on to learn more about one alternative to a traditional 30-year mortgage — and why it isn’t as popular.

What is a 40-year mortgage?

While most Americans are familiar with a 30-year mortgage, other types of home loans exist with a variety of features. Generally, a 40-year mortgage acts in the same way as a conventional mortgage, offering a fixed interest rate over a certain number of years.

Fixed-rate mortgages are generally fully amortized, meaning that interest and principal payments are baked into the monthly payment. At the end of the term, the debt is paid off in full, assuming regular payments are made in full and on time.

The difference between a 30- and 40-year mortgage is the term. A borrower with a 30-year loan is on the hook for 360 monthly payments before they’ll pay off the debt. Meanwhile, a 40-year mortgage will require a borrower to pay for another decade. As we’ll see, that longer term can have a significant impact.

What are the pros?

Today’s home buyers are facing a tough real estate market. Staunch competition is bidding up the price on limited inventory. Meanwhile, climbing interest rates are shackling some prospective buyers with golden handcuffs.

Some buyers are using 40-year mortgages to try and stretch their mortgage budget. At first glance, this makes perfect sense: paying down a mortgage over a longer period would naturally lower your monthly payment. A lower monthly payment could mean qualifying to buy a house big enough for the entire family or moving into a better school district, but over the long term, there are some serious drawbacks.

What are the cons?

A longer term on your mortgage may mean lower monthly payments, but it also means that you’ll be accruing interest for another decade. And while lower payments may offer short-term relief from high rates, those rates get their revenge in the long term.

Using a mortgage calculator, the difference between a 30- and 40-year mortgage becomes clear. Assume you are buying a $500,000 home with 20% down at a 7% interest rate. If you opt for a 30-year mortgage, you’ll pay $2,661 each month. Meanwhile, with a 40-year mortgage, you’ll pay $2,485 — a savings of $176 every month. The price of those monthly savings, however, is high. Over the life of the mortgage, you would pay nearly $250,000 more in interest by taking a 40-year mortgage over a 30-year mortgage.

How you can make a home purchase more affordable

There are a few steps you can take to make the payments on a 30-year mortgage more feasible for your budget, despite the current housing market crunch. Consider eliminating PMI (private mortgage insurance) by making at least a 20% down payment. Shop around for homeowners insurance, and consider appealing your property taxes if you feel they were assessed unfairly. And you may want to steer clear of a 40-year mortgage — especially in today’s interest rate environment.

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Lyft drivers can set their own hours and get paid weekly. But can you earn enough to make it worth the effort? Learn what Lyft drivers can make here. 

If you’re considering taking on a side gig, you’ve undoubtedly heard of Lyft. As the second largest ride-hailing company in the U.S., Lyft offers its drivers numerous ways to earn money, from getting bonuses to keeping 100% of your tips. But does it offer its drivers enough benefits, and will it give your personal finances the boost you’re looking for? Let’s take a closer look.

How much do Lyft drivers make?

Lyft drivers typically earn about $19.90 an hour, according to Gridwise. Indeed puts the average hourly wage even higher at $22.19, with a low of $7.25 and a high of $45.30, though its data is based on only 80 reported salaries and might be skewed by higher grossing drivers.

That said, how much you actually make will depend on numerous variables such as where you live, when you drive, how many Lyft drivers are in your area, and the time that elapses between getting a request and meeting passengers, among others. For instance, if you’re driving in a high demand area (such as San Francisco) and only during peak hours, you’ll likely earn more than a driver in a low demand area, even if you drive the same number of hours.

Notwithstanding market factors, Lyft drivers make money in three ways:

Upfront pay: This is what you earn for completing a ride and will be stated clearly before you accept a ride, so there’s no surprises on how much you can earn for it. (Note: if you live in Portland, New York City, Toronto, or Washington State, Lyft will pay you per minute and per mile, based on your area’s rates, not upfront).Tips: You get to keep 100% of your tips.Bonuses: Every so often Lyft will offer you challenges or bonuses, especially during peak times and holidays. You can also earn bonuses by driving in bonus zones and completing multiple rides during busy times.

Lyft will deposit the money you earn into your checking account weekly, but you could also get instant payouts with the Lyft Direct debit card.

Does Lyft cover a driver’s expenses?

No, Lyft does not cover a driver’s expenses, like car payments, gas, maintenance, and repairs. That said, Lyft does provide some car insurance while you’re driving, such as liability coverage and uninsured motorist.

What extra perks does Lyft offer to drivers?

Lyft drivers are independent contractors, so they’re not employed by Lyft. That means not only do Lyft drivers have to pay all of their taxes, they also don’t get company benefits, like company-sponsored 401(k)s or health insurance.

But that’s not to say Lyft drivers don’t get any benefits at all. In fact, in some markets, Lyft drivers get access to a reward system aimed at reducing the costs associated with driving. The system, dubbed “Lyft Rewards,” will slot you in one of three tiers based on your driving score and how frequently you work during busy hours. Here are some benefits that come with each tier:

The cash back on fuel is available only if you use the Lyft Direct debit card. For more information on how to reach these tiers, check for “Lyft Rewards” in your Lyft driver app, as qualifications depend on your market (if you don’t see “Lyft Rewards,” that means it’s not available in your zone yet).

So, should you drive for Lyft?

Lyft is ideal for those who want to earn extra cash fast. Since Lyft pays its drivers weekly, you can rack up extra savings and meet personal finance goals, such as paying down debt or building an emergency fund.

However, depending on where you live and when you drive, the pay might not be worth the physical wear-and-tear to your car. In fact, this might be a difficult career to sustain over long periods, especially if you’re driving at inconvenient times just to hit bonuses or get peak-hour pay.

But for those who want to work on their own clock, Lyft can definitely be an alternative to your typical part-time job. You could even pair it with other ride-hailing or delivery platforms — Uber, Instacart, GrubHub, or DoorDash — to see which one you enjoy the most.

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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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