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6 Tips to Save on Healthcare and Fitness in the New Year

6 Tips to Save on Healthcare and Fitness in the New Year

Feeling good, looking good, and living the lifestyle you want are just a few of the well-known benefits that come from improving your physical fitness. But did you know that getting in shape can also boost your finances?

Here are six ways to get fit and save on healthcare in the New Year:

1. Use a Health Savings Account (HSA)

Surveys continue to show that too few Americans take advantage of health savings accounts, or “HSAs.” Either they just don’t know that they exist or they underestimate how much they save on healthcare.

You’re eligible to contribute to an HSA when you’re covered by a high deductible health plan. High deductible plans are becoming more popular because they’re more affordable. The higher your deductible, the lower your premium will be.

The beauty of an HSA is that as long as you spend it on qualified medial expenses, the funds are never taxed. Contributions to an HSA, other than those from an employer, are deductible on your tax return, no matter if you itemize deductions or not.

That means that if your average income tax rate is 25%, you get an immediate 25% discount on all your out-of-pocket medical expenses. That’s huge!

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You can take distributions from the account to pay for medical expenses—such as doctor co-pays, prescriptions, and supplies—before your deductible is satisfied and your health benefits kick in. But if you spend money in an HSA on non-qualified expenses, the amount you withdraw will be subject to income tax, plus a 20% penalty.

You can also use HSA funds for a long list of other types of expenses, even if you don’t have insurance for them, such as going to a dentist, ophthalmologist, chiropractor, or psychologist. One of my favorite ways to use HSA money is to get new pair of prescription sunglasses every couple of years.

Another benefit of an HSA is that you don’t have to take any distributions each year; you can let the savings accumulate indefinitely without penalty.

Find out if your health insurance qualifies as a high deductible plan. If so, open up an HSA and begin funding it as soon as possible so you can get a tax break on your next medical expense. For 2017, you can contribute up to $3,400 if you have individual coverage or $6,650 for a family plan.

2. Use a Health Flexible Savings Arrangement (FSA)

Flexible spending arrangements have some similarities to HSAs, but are only offered by employers. An FSA allows you or your employer to make contributions on a pre-tax basis, usually through payroll deductions. For 2017, eligible employees can contribute up to $2,600.

As long as you spend FSA funds on qualified medical expenses, they’re never taxed. So, just like with an HSA, you save an amount equal to the income taxes you would have paid on the money.

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But unlike an HSA, an FSA is a “use-it-or-lose-it” plan. That means you generally must empty the account every year or else only carry over a small amount, while funds in an HSA can roll over from year to year without penalty.

3. Get Healthcare Subsidies 

The Affordable Care Act, also known as Obamacare, mandates every American to have health insurance. Even if Obamacare is eventually repealed, you’re required to have it until changes are officially made. If you can afford heath insurance but choose not to buy it, you’ll be subject to a tax penalty.

Depending on your income, the state where you live, and the number of people in your household, you may be eligible for financial assistance to save on healthcare. In most states, if you earn less than 400% of the Federal Poverty Level, you can get a healthcare subsidy, which reduces your monthly health insurance premium.

The open enrollment period to get health insurance for 2017 began on November 1, 2016 and ends January 31, 2017. So if you remain uninsured, don’t miss the opportunity to get the coverage you need to protect your health and your finances. Use the Obamacare Subsidy Calculator to estimate your monthly health insurance costs.

4. Max Out Your Health Insurance Benefits

Health insurance benefits, such as free preventative checkups and deductibles, are tied to an annual schedule. That means you need to pay attention to the calendar in order to max out your benefits.

For instance, if you burn through your health deductible and need a medical procedure, make sure to get it before the end of the year. If you wait until the following year, you could end up paying more than you have to.

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In other words, take advantage of the time each year after you reach your deductible so you can get your insurance company to pay for as much of your medical expenses as possible.

If there are capped benefits, like a certain number of therapy sessions or an allowable amount of dental work, get part completed in December and the rest in January, in order to take advantage of 2 years’ worth of benefits.

And don’t skimp on the free preventative appointments, like annual physicals, well-woman visits, mammograms, prostate screenings, dental cleanings, and eye exams.

5. Claim Medical Tax Deductions

The IRS allows you to save money by claiming medical expenses as deductions on your tax return. However, the catch is that you must itemize deductions, instead of taking the standard deduction for your tax filing status.

When you itemize, you can claim medical expenses paid for yourself, your spouse, and dependents, unless they’re already excluded from your taxable income, paid for using your HSA or FSA, or were reimbursed to you. In other words, you can’t double dip and get a tax deduction twice.

Another important point with medical deductions is that you can only claim amounts that exceed 10% of your adjusted gross income. For example, let’s say your AGI is $50,000 and your medical expenses for the tax year are $6,000. You could deduct the amount over $5,000, or $1,000. If your medical expenses are less than 10% of your income, then you can’t deduct any of them.

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There’s a long list of expenses that qualify for a tax deduction, and some of them, such as acupuncture, weight-loss programs, and transportation, may surprise you. You can even claim the cost of your health insurance premiums if you pay them as an individual—but not if they’re paid on a pre-tax basis from your paycheck at work.

I encourage your to take a look at the full list of deductible costs found on IRS Publication 502, Medical and Dental Expenses. There are probably many medical expenses that you might not realize are deductible.

6. Review Your Medical Bills Carefully

My last tip to save money on healthcare and fitness is to review your medical bills carefully. If you don’t understand a charge, don’t pay it until the medical provider and your insurance company can explain why you owe it.

If you believe that a health insurance claim has been denied in error, perhaps because of an administrative or coding error, fight for your rights and file an appeal if necessary.

Laura Adams is a personal finance expert, award-winning author, and host of the top-rated Money Girl Podcast. To learn more and connect, click here.

Featured photo credit: Little Perfect Stock via shutterstock.com

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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