Welcome to the weekly blog series, where you’ll find informative insights around daily and long-term financial choices. I’m kicking off the series on a personal note, with seven smart financial moves I have made over the years. Feel free to post a smart financial move that you are proud of.
- Opening up a Health Savings Account (HSA).
HSAs are a great move for people paying their own health insurance and can afford the cash outlay required in high-deductible plan. Contributions are shielded from taxes—effectively lowering your total tax bill—and you spend funds towards your health care as needed. Best of all, when you reach retirement age, these funds are in place to cover expenses such as Medicare premiums. While your HSA balances build, they can be invested in the stock market for potentially large long-term appreciation.
- Home ownership.
You’ll read lots of rent-vs-buy articles. They are often wide of the mark. The tax benefits associated with mortgages and taxes (despite the recent tax reform changes), the enforced level of savings that accrues as you build equity, and one of history’s greatest inflation hedged assets, simply can’t be beat. I started off small with a $100,000 fixer-upper and turned it into my dream home as my income and savings grew. And I look forward to tapping the equity with a reverse mortgage when I am retired.
- Switching to exchange-traded funds.
Why would anyone still own mutual funds? You’re paying eye-popping salaries to fund managers that simply aim to keep up with the market (and often fail to do so!). Save a lot of annual expenses by swapping into ETFs (although not before assessing the tax implications with an advisor). ETFs let you have a targeted approach to the various corners of the economy in tandem with your personal risk profile and goals.
- Second-hand wheels
I’ve never bought a new car. Fact is, today’s three-year old cars will be much longer-lasting than new cars of a generation ago. I bought my 2008 Honda Accord in 2011, for half the price it sold for new. Oil changes, belts and tires is all it’s ever needed. I saved even more by buying a car that had been part of the rental car fleet. Don’t believe the myth that these cars take a beating. They are very well-maintained and can cost thousands less.
- Challenge your home owner’s tax bill if it goes up sharply.
I did just that—and my pleas were heard. There is nothing to lose and if you make a strong case, you will indeed get a fair shake.
- The layover trick.
When I fly abroad, I never use the national airline of the country I’m visiting. Instead, use the airliner of a neighboring nation. Not only are the fares often much cheaper, but you get to spend a few days in a place like Amsterdam or Paris at no extra charge enroute to your final destination. Icelandair and Aer Lingus have especially popular programs these days.
- Basking in the sun’s rays
My top financial move was a decision to install solar panels. There are several major tax credits in place right now, and I’m doubting they will be there in a few years. While the payback period on my solar is under 10 years, most people experience a 12-13 year payback. After that, it’s all gravy.