Money Management

A writer explains that she’s trying to save her HSA funds for the future. Read on to see her reasons. 

Last year, my family switched over to a high-deductible health insurance plan. And while that wasn’t the best thing, since it now has us paying a lot more for medical care, the silver lining was that our new plan renders us eligible to contribute to a health savings account, or HSA.

HSAs are a hybrid savings and investment plan whose main purpose is to cover medical costs. To participate in an HSA this year, your health insurance plan has to have a minimum deductible of $1,500 for self-only coverage and $3,000 for family coverage. It also has to have a maximum out-of-pocket limit of $7,500 for self-only coverage and $15,000 for family coverage.

Meanwhile, over the past few months, I’ve had to dip into my savings account to cover some larger healthcare expenses, like an orthopedist bill for my daughter and a bill for medical tests I had to undergo. I could’ve raided my HSA for those expenses. But here’s why I didn’t.

It’s all about enjoying tax-free growth

HSAs offer three different tax breaks. Your contributions go in tax free, and any money you don’t need to spend on healthcare right away can be invested in a tax-free manner. HSA withdrawals are also tax free when used for qualified medical expenses.

Since I like the idea of tax-free growth, I’m motivated to keep my money in my HSA as long as possible. My goal, in fact, is to grow that balance into a large sum for retirement, when I’m more likely to need money to cover medical expenses and my income may be lower due to working less or not working at all.

In fact, last year, Fidelity said that the average 65-year-old couple would need $315,000 to cover their healthcare costs throughout retirement. And since I’m not close to retirement age, that figure is likely to be higher for me due to inflation. So I’d rather leave my HSA untouched as long as possible.

In fact, when I last checked, my HSA balance was around $7,000. Even if I don’t add more money to that account, if I keep that balance invested at an average annual 7% return for 25 more years, it will grow into $38,000. That 7% return is also a fairly conservative one seeing as how the stock market’s average annual return, as measured by the S&P 500 index, has been 10% before inflation over the past five decades.

An account I want to make the most of

Not only do HSAs let you save for healthcare in a tax-advantaged manner, but once you turn 65, there’s no penalty for taking a non-medical withdrawal from an HSA. In that situation, you simply pay taxes on your withdrawal rather than take it tax free, kind of like a traditional IRA.

And that’s another reason I’m eager to accumulate as large an HSA balance as possible. Not only do I want more money saved for healthcare purposes in retirement, but I also like that my HSA can serve as a back-up retirement plan of sorts. So I’m trying to do what I can to not take withdrawals from my HSA if I have other funds I can use to cover my near-term medical bills.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Funding an IRA in your mid-40s is essential, especially if you haven’t started saving for retirement yet. Read on to see why. 

By the time you reach your mid-40s, you may be in a pretty decent place financially. At that point, your kids may be old enough where you don’t have to spend so much money on childcare costs. And you may have a better handle on your mortgage payments than you did when you were earning less.

In fact, a lot of people find that their earnings peak in their mid-40s. At that point, you may have 20 years of work experience or more under your belt, and that could lead to a string of promotions that amount to a very respectable wage.

But what if you’re 45 years old and have yet to start socking money away in your IRA? Frankly, that’s not the most optimal situation to be in. But it’s also far from a hopeless one. In fact, if you contribute $5,000 to your IRA at age 45, it might help kickstart your nest egg in a very meaningful way.

Your money needs time to grow

You’ll often hear that it’s important to start saving for retirement at as young an age as possible. That way, your money gets more time to grow as you invest it.

But it may be that you’ve reached your mid-40s without getting to fund your IRA. If so, you may be eager to stick $5,000 into that account at age 45, invest it in stocks, and hope for the best.

Now 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 index. If you invest your $5,000 at age 45 and don’t touch it until age 65, you’ll end up with close to $34,000.

Of course, $34,000 is not really what most people would consider a sizable nest egg. It’s a lot of money in its own right, but it may not be enough to get you through all of retirement. But the good news is that if you manage to carve out $5,000 for your IRA at age 45, you might also manage to uphold that pattern for many years.

In fact, let’s say you contribute $5,000 to your IRA every year between the ages of 45 and 65. Assuming that same 10% average annual return in your account, you’re looking at a nest egg worth about $286,000. That’s a pretty decent sum of cash to bring with you into retirement.

Try to start funding your IRA before your mid-40s

Starting to contribute to an IRA at age 45 is better than waiting even longer. But even so, at that point, you’ve missed out on several decades of lost investment gains. So if possible, do your best to start funding your IRA during your 20s.

You may not be able to part with $5,000 a year at that point, especially during your early or mid-20s, when you may only be earning an entry-level salary. But even if you only manage to save, say, $1,000 a year in your IRA during your 20s, it could lead to a lot of long-term wealth — especially if you’re able to gradually increase those contributions and save even more during your 30s and 40s.

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Is the cost of your self-care routine getting you down? You might not have to give up your special treat. Find out how one writer plans to save. 

Investing in your self-care can be worth it. We all deserve some pampering from time to time. One self-care expense that I treat myself to regularly is professional manicures. I’ve been going to the same luxury nail salon for over two years. Over time, the prices have continued to climb. But that doesn’t mean I’m ready to give up my high-end manicures. Here are the changes I’m making to prioritize this self-care expense without getting into credit card debt.

Self-care is a priority for me

After covering must-pay bills like my mortgage and utilities, much of my monthly income goes towards personal finance goals like investing and saving. But I’m also willing to spend a good amount of money on products and services that improve my well-being.

For me, self-care is a worthwhile investment. Since I want to feel like the best possible version of myself, I prioritize self-care expenses and include them in my monthly budget. That’s why I pay to get professional manicures regularly.

Many people fear budgeting because they worry they can’t continue paying for the things that bring them joy. However, that’s not the case. In addition to budgeting for necessary costs like rent, utilities, insurance, and groceries, you can also plan for other expenses.

Examples of fun budgeting categories include self-care, travel, entertainment costs, or nights out with friends. As long as you’re making solid choices that don’t worsen your financial situation, it’s more than all right to budget for non-essential costs that make you happy. After all, life is for living.

This change will save me hundreds in 2024

I previously mentioned that I’ve been a loyal customer at my go-to salon for a long time. During the last two years, service prices have increased. It’s worth mentioning that I go to a luxury salon, not a typical quick-service salon, where you’re in and out and on with your day.

The manicurists at the luxury salon I visit have extensive experience and only use high-quality products. Additionally, the salon specializes in hand-drawn nail art, a skill that costs more. As you might imagine, getting your nails done regularly at a salon like this is not cheap.

I’ve been paying around $110 (including gratuity) when getting my nails done. I’m on a set schedule, so I have an appointment to get my nails done every three weeks. Every time I charge my credit card, I take a moment to consider how much this pampering is costing me.

But I have a plan that will make this cost feel a little less painful. Now that prices have increased, I’ve decided to alter how often I get my nails done in the year ahead. Instead of getting a professional manicure every three weeks, I’ll get my nails done every four weeks.

Going every three weeks, I’d get about 17 manicures a year. At $110 per visit, that’s $1,870 for a year of high-end manicures. As I said, it’s not cheap! But if I switched to going every four weeks, I’d only get 13 manicures over the course of a year. My manicures would cost only $1,430 per year. That means I’ll save about $440 a year. The best part is I don’t have to skip out on this special treat. With this routine change, I can continue to rock fab nails while boosting my savings account balance.

Small changes could help you keep more money in your pocket

If you treat yourself by paying for expenses that improve your life, you may not have to give up on your favorite treat when prices increase. Instead, figure out if there’s a way to make changes that allow you to keep more money in your checking account.

Choosing a different product or service or altering your schedule to do an activity less often could help you save money without giving up what matters most to you. Don’t be afraid to get creative to find the best solution.

If you need help budgeting to continue to pay for the expenses that are important to you, check out our list of the best budgeting apps. With the help of technology, it may be easier than you think to stay on top of your spending goals.

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Funding an IRA in your mid-30s could go a long way. Read on to see why. 

Your mid-30s may be an interesting period of life from a financial standpoint. At that point, there’s a good chance you have a decade or more of work experience under your belt. That means you may be in a position where you’re finally earning a higher salary.

On the other hand, you might have your share of expenses as a 35-year-old. If you own a home, your ongoing mortgage payments may be eating up a fair share of your income. And if you have young kids, you may be spending a large chunk of your paycheck on childcare just so you can hold down a job.

As such, it’s easy to see why saving for retirement at age 35 may not seem so feasible. But if you’re able to make a nice contribution to your IRA at age 35, it could go a long way toward setting you up for a comfortable retirement down the line.

When a single contribution goes a long way

Funding your IRA is, ideally, something you should aim to do every year in your 30s (and every year in general). But you may be surprised at how effective a single $5,000 IRA contribution is in your mid-30s.

In fact, let’s assume that you not only make a $5,000 IRA contribution at age 35, but that you invest your retirement savings in stocks. 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. Assuming you enjoy that same return, and that you don’t retire until age 65, you’ll grow your $5,000 contribution at age 35 to a pretty impressive $87,000. That’s an $82,000 gain.

Now is $87,000 enough money to retire on? Probably not. Even if you’re willing to lead a relatively frugal lifestyle, you’ll probably want more money than that to use throughout your senior years.

But is $87,000 a nice start to your retirement nest egg? Absolutely.

In fact, let’s say you make a $5,000 contribution to your IRA at age 35 and then don’t manage to stick another dollar into that account for 10 years. If, between the ages of 45 and 65, you manage to save $300 a month for retirement, all the while generating an average annual 10% return on your investments, you’ll end up with a nest egg worth about $293,000.

Do what you can to fund your IRA

It’s not easy to fund an IRA when you’re at an age where your earnings haven’t yet peaked and you have many expenses to contend with. But the younger you are when you start making IRA contributions, the more wealth you stand to build for retirement over time.

As such, it pays to push yourself to find the money for your IRA. And if you can’t manage that every single year during your 30s, at least try your best to make a nice, robust contribution at one point during that pivotal decade of life.

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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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Qualifying for a mortgage can be harder when you’re not a salaried worker. Read on to see why. 

There are many benefits to being self-employed. Not only can you commonly set your own hours and enjoy a nice work-life balance, but you also might, in some cases, have an opportunity to boost your income by commanding a higher rate than what you’d get as a salaried worker.

But being self-employed can be a challenge when the time comes to apply for a mortgage. One big factor mortgage lenders look at when approving loan candidates is income. Not only do they want you to have an income to begin with, but they want to be reassured that your income is ongoing and stable. That can be difficult when you work for yourself and the amount of money you earn varies from one month to the next.

The good news, though, is that self-employed people get mortgages all the time. You may need to provide more documentation than someone who’s a salaried employee, but ultimately, if you earn enough money to support the loan amount you’re asking for, your chances of getting approved are pretty strong. This especially holds true if you also happen to have a great credit score.

Qualifying for a mortgage as a self-employed worker

When you work for an employer, it’s common for a mortgage lender to not only ask to see copies of recent pay stubs, but also, to get a letter from your company verifying your employment and standing at work. When you work for yourself, there’s no one to provide that same sort of letter.

What you’ll commonly have to do instead is provide proof that you’ve been earning a steady income and have the potential to keep doing so. That should give your lender reassurance that you’ll be able to repay your mortgage.

Now one thing you should know is that if you recently became self-employed, you may have a hard time getting your mortgage application approved. Rocket Mortgage says you’ll generally need a history of self-employment income for two years to qualify for a home loan as a non-salaried worker. However, there are exceptions.

But let’s say you’ve been self-employed for two years or longer. At that point, you’ll need to provide proof of your income — not just that you earn money now, but are likely to continue doing so. To that end, prepare to provide your mortgage lender with documentation such as:

Recent tax returnsBank statementsCopies of contracts you have with clients showing that you’re likely to have work coming in

The latter isn’t necessarily something every self-employed person has. But it could go a long way toward helping you qualify for a mortgage. If you don’t have contracts for ongoing work, you can instead try showing your mortgage lender that you have a history of working for the same clients consistently over the past few years.

You can still get a mortgage if you’re self-employed

Just because you’re self-employed doesn’t mean you don’t have a steady, reliable income, and a high enough one to support the loan amount you’re seeking out. So don’t assume you’re doomed to be denied a mortgage because you’re not on an employer’s payroll. Just be prepared to provide extra paperwork and go the extra mile to reassure your lender that you’re capable of repaying a home loan over time.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The cost of homeownership can rise over time. Read on to see what factors can affect it. 

The main benefit of signing a fixed-rate mortgage is getting to lock in your monthly payments for the life of home loan. If you sign a 30-year, fixed-rate mortgage that leaves you with monthly payments of $1,100 each, you’re guaranteed to keep paying $1,100 a month until your home is paid off — assuming, of course, that you don’t opt to refinance the loan, in which case your monthly payments might drop.

But signing a fixed-rate mortgage does not guarantee that your housing costs won’t rise over time. Here are a few reasons to assume they will — and budget accordingly.

1. Your property tax bill could climb

Property taxes are an unavoidable expense when you own a home. And yours have the potential to climb over time as your home’s value increases. Granted, that’s not guaranteed to happen — but it’s likely.

You should also know that any time you make major improvements to your home, you run the risk of seeing your property tax bill rise. That’s because your renovations are likely to be reflected in your home’s future assessments.

2. Your homeowners insurance premiums could rise

The amount of money you pay for homeowners insurance could increase through the years, even if you don’t end up filing many claims against your policy. If the cost to replace your home in the event of damage rises, you may need to spend more on insurance so that you have adequate replacement cost coverage.

You should also know that if you do file a series of claims against your homeowners insurance policy, that alone could drive the cost of your premiums up. But in many cases, filing those claims may be unavoidable.

3. Your maintenance and repair costs could increase

You’ll generally hear that it’s a good idea to budget 1% to 4% of your home’s value for annual maintenance. But the older your home gets, the more you might need to veer toward the higher end of that range.

Similarly, as your home ages, repairs may become more common. You might have to spend more money to fix a failing air conditioning system, replace worn fixtures, and address issues like rotting wood on your fence or deck.

Pad your budget accordingly, year after year

While signing a fixed-rate mortgage will leave you with the same monthly payment over time, that doesn’t mean you won’t end up spending more on housing from one year to the next. That’s why it’s a good idea to allocate extra money for housing at the start of each year, when you (ideally) sit down to map out your budget.

If, right now, you have $1,800 a month allocated to housing, $1,100 of which is meant to cover your mortgage payment, next year, consider raising that number to $1,900 (and earmark some of the raise you may be getting at work for that purpose). The year after that, increase your monthly housing costs to $2,000, and so forth. Doing so is a good way to help ensure that you’re able to keep a roof over your head without undue financial stress.

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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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