JD Bond

In the realm of personal finance, Health Savings Accounts (HSAs) often fly under the radar. While many associate HSAs solely with medical expenses, these accounts offer a trifecta of tax advantages that can significantly bolster your financial strategy. Let’s delve into why HSAs are a hidden gem in the investment world.

Understanding the Triple Tax Advantage

HSAs provide a unique combination of tax benefits:

1. Pre-Tax Contributions: Money deposited into an HSA is tax-deductible, reducing your taxable income for the year. This means you pay less in federal income taxes upfront. Investopedia
2. Tax-Free Growth: Funds within the HSA grow tax-free. Whether through interest or investments, your earnings aren’t subject to taxes, allowing your savings to compound more efficiently. NerdWallet: Finance smarter
3. Tax-Free Withdrawals: When you use HSA funds for qualified medical expenses, withdrawals are tax-free. This ensures that your money goes further when covering healthcare costs. Investopedia

HSAs as an Investment Vehicle

Beyond immediate medical expenses, HSAs can serve as a powerful investment tool:

• Long-Term Growth: By investing HSA funds in stocks, bonds, or mutual funds, you can potentially achieve substantial growth over time. This strategy is particularly beneficial if you can cover current medical expenses out-of-pocket, allowing your HSA to function similarly to a traditional retirement account. NerdWallet: Finance smarter
• Retirement Healthcare Costs: Healthcare is a significant expense in retirement. Utilizing HSA funds to cover these costs can be more advantageous than withdrawing from a 401(k) or IRA, as HSA withdrawals for medical expenses remain tax-free. HealthEquity

Flexibility and Control

HSAs offer notable flexibility:

• No “Use-It-Or-Lose-It” Rule: Unlike Flexible Spending Accounts (FSAs), HSA funds roll over annually, allowing your savings to accumulate over time.
• Post-Retirement Use: After age 65, withdrawals for non-medical expenses are taxed similarly to a traditional IRA, providing additional financial flexibility.

Eligibility and Contribution Limits

To qualify for an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP). Contribution limits are subject to annual adjustments, so it’s essential to stay updated on the current thresholds.

Health Savings Accounts are more than just a tool for managing medical expenses; they are a versatile component of a comprehensive financial strategy. By leveraging the triple tax advantages and investment opportunities HSAs offer, you can enhance your financial well-being and prepare for future healthcare costs.

For more insights on maximizing your savings and making informed financial decisions, explore our other articles on Money Not Spent.

Maximizing the HSA’s Potential

To fully leverage the benefits of an HSA:

• Invest the Funds: Instead of letting your HSA contributions sit in a low-interest savings account, consider investing in diversified, low-cost index funds. This strategy can enhance growth over time. Mad Fientist
• Pay Out-of-Pocket for Medical Expenses: By covering current medical expenses with after-tax dollars, you allow your HSA funds to remain invested and grow tax-free. Keep detailed records of these expenses, as the IRS allows you to reimburse yourself from your HSA at any point in the future, provided you have the receipts. Mad Fientist
• Treat the HSA as a Retirement Account: After age 65, withdrawals from your HSA for non-medical expenses are taxed as ordinary income, similar to a Traditional IRA. However, using the funds for qualified medical expenses remains tax-free, providing flexibility in retirement. Mad Fientist

Considerations Before Opening an HSA

• Eligibility: To contribute to an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP). Evaluate whether an HDHP aligns with your healthcare needs and financial situation.
• Fees and Investment Options: Not all HSA custodians offer the same investment options or fee structures. Research and choose a provider that offers low-cost investment choices and minimal fees to maximize your account’s growth potential.

Conclusion

Health Savings Accounts (HSAs) are often overlooked in personal finance discussions, yet they offer unparalleled tax advantages that can significantly enhance both healthcare savings and retirement planning. By understanding and leveraging the triple tax benefits of HSAs—tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses—you can maximize your financial strategy. Treating your HSA as a long-term investment vehicle, investing the funds wisely, and considering it as a supplementary retirement account can lead to substantial growth over time. As with any financial tool, it’s essential to assess your individual health needs and financial goals to determine how an HSA can best serve you. By incorporating HSAs into your financial planning, you’re not only preparing for potential medical expenses but also strategically building a more secure financial future.

Health Savings Accounts are more than just a tool for managing medical expenses; they are a versatile component of a comprehensive financial strategy. By leveraging the triple tax advantages and investment opportunities HSAs offer, you can enhance your financial well-being and prepare for future healthcare costs.

For more insights on maximizing your savings and making informed financial decisions, explore our other articles on Money Not Spent.

For more educational finance content like and follow MoneyNotSpent.com

Sources

Are you new to investing and wondering how to make the most of your first $500+? Whether it’s from a windfall, stimulus check, or savings, knowing where to start can be overwhelming. This guide will help you navigate your options as a beginner investor.

Quick Ways to Invest $500 for Beginners:

1. Start Your 401(k)

If your employer offers a 401(k) with company matching, this should be your first priority. Here’s why:

• Free money: Your employer matches a portion of your contributions.
• Tax benefits: Contributions are made pre-tax, reducing your taxable income.
• Compound growth: Over time, your investments can grow significantly.

Example: If your company matches 50% of your contributions up to 6% of your salary, contribute at least 6% to get the full match. This essentially gives you an immediate 50% return on your investment.

2. Open a Roth IRA

If you don’t have access to a 401(k) or have additional funds to invest, consider a Roth IRA:

• Contribution limit: $7000 per year (as of 2024) for those under 50.
• Tax advantages: Contributions are made with after-tax dollars, but earnings grow tax-free.
• Flexibility: You can withdraw contributions (but not earnings) without penalty at any time.

1. Invest in Index Funds

Index funds have gained popularity, especially among younger investors, for good reasons:

• Low fees: They typically have lower expense ratios than actively managed funds.
• Diversification: They provide exposure to a broad range of stocks or bonds.
• Simplicity: They’re easy to understand and require minimal management.

Popular index funds include:

• S&P 500 index funds
• Total Stock Market index funds
• Target Date funds (which automatically adjust asset allocation as you approach retirement)

The Power of Compound Interest:

Understanding the Rule of 72 can help you appreciate the potential of long-term investing:

• Divide 72 by your expected annual return to estimate how long it will take your money to double.
• Example: At a 10% annual return, your money would double approximately every 7.2 years.

Final Words for New Investors:

1. Start early: Time is your greatest asset when investing.
2. Stay consistent: Regular contributions, even small ones, can add up significantly over time.
3. Think long-term: Don’t panic during market downturns; they’re normal and temporary.
4. Educate yourself: Continue learning about investing strategies and personal finance.
5. Consider alternative investments: Look into education, skills development, or starting a side hustle.

*Disclaimer Remember, this article provides general information and is not financial advice. Consider consulting with a financial advisor for personalized guidance based on your specific situation.​​​​​​​​​​​​​​​​

“House hacking” is a growing trend in the finance community, offering a path to financial flexibility and significant savings. This article explores how financially savvy individuals are using this strategy to reduce expenses and achieve greater financial freedom.

What is House Hacking?

House hacking involves living in a property while simultaneously generating income from it. This can be done by:

1. Buying or renting a multi-family property and living in one unit while renting out the others
2. Renting out spare rooms in your home to roommates
3. Using short-term rental platforms like Airbnb to rent out portions of your living space

The goal is to have other people’s rent payments cover most or all of your housing costs, allowing you to live nearly rent-free or pay off your mortgage faster.

Why House Hacking is Gaining Popularity

1. Financial Benefits:

• Reduced housing costs
• Faster mortgage payoff
• Potential for building equity
• Tax advantages for property owners

1. Flexibility:

• Easier entry into real estate investing
• Ability to live in desirable areas at a lower cost
• Potential for nomadic or remote work lifestyles

1. Earlier Path to Financial Independence:

• Increased savings rate
• More funds available for investing
• Potential for passive income

Success Stories

Several finance bloggers, YouTubers, and authors have popularized house hacking:

1. Graham Stephan: Real estate agent and investor who achieved millionaire status in his 20s through house hacking and frugal living.
2. Mike Rosehart: Canada’s youngest self-made early retiree at age 24, credited to acquiring 15 properties and embracing frugality.
3. Alan Corey: Author of “Million Bucks by 30,” who used house hacking in New York City to build wealth on a modest salary.
4. Grant Sabatier: Went from $2.26 to millionaire in 5 years, partly through house hacking strategies.

Practical Advice from House Hackers

Nick Arsendorf:

• Rents a two-bedroom apartment and subleases the spare room
• Lives in a three-bedroom house, renting out two rooms to cover most expenses

Travis Pullin:

• Recommends finding a property with the most bedrooms for the lowest price
• Suggests renting to people you know and trust
• Emphasizes the importance of adequate parking . Josh Hastings:

• Rented out two rooms in his townhome for seven years
• Offset costs while providing affordable housing for friends
• Suggests considering room rentals even if married

How to Get Started with House Hacking

1. Research local real estate markets and rental rates
2. Analyze potential properties for house hacking opportunities
3. Consider your comfort level with sharing living space
4. Understand local laws and regulations regarding rentals
5. Create a solid financial plan and budget
6. Screen potential tenants or roommates carefully
7. Set clear expectations and agreements with co-habitants

Conclusion

House hacking offers a powerful strategy for reducing housing costs and accelerating financial goals. With low interest rates, remote work opportunities, and platforms like Airbnb, it’s becoming increasingly accessible. When done correctly, house hacking can provide not only financial benefits but also increased flexibility and freedom.

For more information, follow MoneyNotSpent and explore resources from successful house hackers mentioned in this article.​​​​​​​​​​​​​​​​

In the world of personal finance, there are a few powerful concepts that can help individuals make informed decisions and achieve financial freedom. Two of these concepts that go hand in hand are the Rule of 72 and compound interest. Understanding these concepts can empower you to make smarter investment choices and grow your wealth over time.

In this article, we will explore the Rule of 72, explaining what it is and how it works, as well as delving into the wonders of compound interest and its impact on your financial journey. By the end, you’ll have a clear understanding of how these concepts intersect and how they can be leveraged to reach your long-term financial goals.

I. What is the Rule of 72?

The Rule of 72 is a simple mathematical formula that allows individuals to estimate the time required for an investment to double in value, based on the rate of return. It serves as a quick and easy mental calculation tool that can provide an approximate timeframe for investments to grow.

The formula is straightforward: Dividing 72 by the annual interest rate gives you the estimated number of years it will take for an investment to double. For example, if you’re earning an 8% annual return on your investment, dividing 72 by 8 will estimate that your investment will double in approximately 9 years.

This rule acts as a rough guideline and can be utilized for various investment scenarios. Whether you’re considering the doubling time for a stock holding, a mutual fund investment, or even the growth of your retirement savings, the Rule of 72 can offer a quick estimate of the potential growth timeline.

II. The Power of Compound Interest

Compound interest is often referred to as the “eighth wonder of the world” by financial experts. It is a concept that allows your money to work for you and multiply over time.

Unlike simple interest, which is calculated solely on the principal amount, compound interest takes into account both the principal and the accumulated interest, resulting in exponential growth.

To understand compound interest in action, let’s consider an example. Suppose you invest $10,000 at an annual interest rate of 5%. After one year, your investment would grow to $10,500, with a $500 interest gain. The following year, your interest is calculated on the new amount of $10,500, resulting in a total of $11,025. This compounding effect continues year after year, maximizing your returns.

The beauty of compound interest lies in its ability to accelerate the growth of your investments over time. The longer your money is invested, the more significant the impact of compound interest becomes. By starting early and allowing your investments to grow for longer periods, you can harness the true power of compound interest, significantly multiplying your wealth.

III. Rule of 72 and Compound Interest: A Winning Combination

When the Rule of 72 and compound interest intersect, they provide an immensely powerful tool for investment planning and goal setting.

By combining the Rule of 72 with compound interest, you can estimate the potential growth of your investments and make informed decisions accordingly. Let’s say you want to save $100,000 for a down payment on a house, and you have a target timeframe of 15 years. By applying the Rule of 72, you can calculate the approximate annual rate of return needed to achieve this goal. Dividing 72 by 15 gives you an estimated return of 4.8% per year.

Knowing this target rate, you can then explore different investment options to identify those that can potentially meet or exceed this return. Whether it’s through stocks, bonds, real estate, or other investment avenues, leveraging the power of compound interest while adhering to the Rule of 72 can guide your investment strategy.

Additionally, understanding these principles can help you plan for retirement. By considering the Rule of 72, you can estimate the number of years it will take for your retirement savings to double, giving you a tangible time frame for your preparations. Moreover, the sooner you start saving, the more time your investments have to compound, easing the burden of saving larger amounts later in life.

Conclusion

The Rule of 72 and compound interest are crucial concepts in the world of finance, providing individuals with valuable insights into investment growth and planning. Recognizing the power of compounding and understanding how the Rule of 72 can provide quick estimates adds an additional layer of knowledge to your financial toolbox.

By applying these concepts strategically, you can make more informed investment decisions and maximize the growth of your wealth. Remember, time is your ally when it comes to compounding, so start early, stay consistent, and allow the Rule of 72 and compound interest to work their magic on your financial journey.

Personal Capital Review from an average guy with a regular job, learning how to organize his finances. When you were growing up and counting the coins in your piggy bank, you probably never envisioned the option to track your finances all in one place in just a few minutes per day.
And while counting quarters and dollars is one thing, as we age, knowing our net worth and tracking our finances becomes more essential seemingly daily. Luckily, there is an assortment
of ways to do this.
One app and financial platform that stands out amongst the rest is Personal Capital.
Personal Capital is an app that offers essential financial tracking on things like daily finances, loans, bank account statements, monthly bills, retirement contributions, and investments.
Throughout the next couple of minutes, we will go over the features that Personal Capital offers, including the app, unique tools, and even some things I’ve learned through my personal
experience with the app.
Quick Review of Personal Capital
To give you a quick rundown:
Personal Capital is famous among many finance professionals and savvy people. Personal Capital is an excellent app for beginners and seasoned investors alike. No longer do you need
to use spreadsheets, write down expenses, keep receipts, or balance checkbooks after every transaction? If linked to your bank account, the app will automatically categorize each spending. Personal Capital is an app you can download on your phone and monitor your spending and
group transactions by category. No longer do you need to keep a spreadsheet on a computer or balance your checkbook since Personal Capital does all of that for you!
The app allows you to know where your money is going. It even allows you to set monthly budget goals and track your investment returns in retirement and taxable investment accounts.
Personal Capital is an investment app that links to your portfolio accounts and monitors your investment returns, such as your 401k, IRA, HSA, IPERS, SEP, and other retirement and
taxable accounts.

Quick Pros & Cons of Personal Capital

Most users find these positives when using Personal Capital:
● The app is an excellent resource for staying motivated and on top of finances.
● Monitor your budget and expenses
● The ability to track monthly cash flow
● Track Assets vs. Liabilities and Networth
● Informative Information analysis of asset allocation and fund fees
● Easy to use, the app is easy to navigate
● Free to use, the app is free to download and has excellent value.
● Customer Service responsive to phone calls and emails and have quickly fixed any
issues I’ve had.
Some users have described these Cons with Personal Capital:
● Linking your personal accounts to the app can take time
● Some are skeptical of linking accounts
● Accounts often need refreshing and reconnecting
● Fees for Wealth Management feature
For the Wealth Management feature that Personal Capital offers, this only applies to high net
worth individuals eligible for this feature. This could be a pro for some investors, but others may
prefer traditional low-cost index funds at brokerages such as Vanguard, Fidelity, Charles
Schwab, Blackrock, etc

Full Review of Personal Capital and Features:
Let’s first look at who Personal Capital is for
Who is Personal Capital For?
People on top of their finances or actively working towards financial goals. I came across the app after hearing about it from Financial bloggers as they recommend the app for being a resource in paying down debt, tracking spending, and watching investments grow.
Personal Capital Features 8 Great Features
GRADE 10/10 A
Personal Capital has cool features for tracking investments and educational information about
fees and allows you to see your portfolio comparisons and returns vs. S&P 500, an index
commonly used to track market returns.

Here are the Personal Capital features I enjoy:

Budgeting Tool:
The Personal Capital Budgeting Tool sees where your expenses are coming from, grouped by
category Budgeting tool is useful because it allows you to make changes in spending habits. Knowing where you’re money is going can help to make cuts on unnecessary purchases to
save more money.

Cash Flow Tracker:
Similarly, the app Cash Flow Tracker, is a tool to see how much money is coming in vs. being
spent. Cashflow is useful to monitor, because the more net cash you have to go in vs. gone out, the more you’re able to invest and take advantage of opportunities. Cashflow is vital to have
bills accounted for, emergency fund, and build-up assets

Investment Returns Tracker:
An interactive feature to show how your portfolio is performing vs. common indexes such as
S&P 500, Dow Jones, or International funds. Historically the S&P 500 has returned over 7% after adjusted for inflation. This is the most common benchmark to see if your investments are
keeping pace with the market. Networth Tracker/ monitor Assets vs. Liabilities. This feature is
fun to see your network go up based on paying down debts and investments growing.

The Networth Tracker:
This is the best feature with Personal Capital (in our opinion). The net worth tracker tool
manages and monitors all of your assets and liabilities in one spot. Debts are liabilities. If you
have more debt than investments, home equity, or other values, you’d have a negative net
worth. However as you pay off debt and begin investing its fun to watch networth increase in
accounts such as 401k, Roth IRA, accounts that will receive dividends, reinvestment and compound interest.

Portfolio Analysis:
On portfolio analysis this feature lets you check your investments with Informative information
about Asset Allocation, Cash, Bonds, US Stocks, International, Alternatives Large Cap, Mid Cap, Small Cap

Fund Fees Analyzer:
The Personal Capital Fund Fees analyzer tells you what fees you are paying for your
investments, including hidden or excessive fees. The analysis also tells you how much fees
could cost you over time based on the expected 8% returns. The app has features to see the
fees of investments. I am a fan of low fee index funds like Vanguard and can see my fund has a
small fee of 0.04, which is one of the most economical cost funds.
Many mutual funds have much larger prices, which can make a significant impact on potential investment gains over long periods. As the app, many mutual funds have high costs and are not
tax-efficient.

Check ROI Tracker & Portfolio Tracker:
Monitoring your ROI with the Personal Capital portfolio tracker feature that monitors returns vs.
indexes such as S&P 500 an index fund of 500 biggest companies in US Stock market, index
funds are a favorite of young people with time to invest, Bogleheads or F.I.R.E (Financially
Independence Retire Early) community with bloggers such as Mr. Money Mustache, Grant
Sabatier and JL Collins (The Simple Path to Wealth author), (JLCollins stock series articles
written for his daughter), and other finance gurus like Ramit Sethi are big fans of index funds for low fees, historical returns beating most fund managers.
The app comes with a retirement planner, a way to monitor if you’re on pace for your retirement
goals. All of these features are fun to track, especially as you make progress paying down debts, increasing investments, and seeing your net worth increase is a satisfying feeling. I love seeing transactions when my finances get dividends, that reinvest knowing that compound
interest will build-up

Asset Allocation:
The Personal Capital Asset Allocation is an advanced feature that lets users see what sectors their investments are in based on percentages.
This allows me to diversify and add stocks and ETFs in other industries if I choose to balance portfolios in underweight areas.I enjoy this feature as I have learned about investing through
app resources. (Though the closer to retirement you get you may get less aggressive and more conservative in asset allocation, you may have more bonds or other asset classes in case of market volatility

As you can see in the Screenshots above, using the Asset Allocation feature Personal Capital provides I am able to see how my investment allocation holds up against traditional allocations,
like the S&P 500.
Additionally, I also get to see my allocations of Cash, Bonds, US Stocks, International
Stocks,and alternatives.

How the Personal Capital App helped me in 3 areas:
Paying off debt, Saving, Investing.
● I was able to monitor paying off 10,000 student loans and monitor my other expenses
over a two year period.
● I am able to track my savings for accounts such as house Downpayment
● Check retirement Accounts such as 401k, Roth IRA and other accounts such HSA and a
nonretirement account with Robinhood

The case for Personal Capital
For me, the Fun part after taking on debt and establishing a budget is saving up money and
tracking investments and watching assets increase and liabilities decrease. It can be addicting
in a positive way to encourage proper financial management.
Another favorite feature of the app compares your investments vs. S&P 500 (500 biggest US-
traded stock companies) Goes into historical returns, fund fees, and asset allocation.
In my opinion, Personal Capital is the best app because you track everything. Budget, bank
account, investments, broken down into allocation and fees. Every transaction you make
monitored. Group into categories. Does smart weighing compare your investment portfolio vs.
the S&P 500. Fun because it tracks your net worth and tells you how all your investments are
doing. Perfect for finance geeks, everything but credit score. Monitors all your assets and
liabilities. So you instantly can see your finances improving on your phone for free.
The app also has an Wealth Management option for people with higher net worth.($1 million
plus inevitable assets) The fees for this service looks to be a little under 1%
Budgeting & Fintech Apps
Mint -Mint is another similar app to track paying down debt and setting goals. I also used mint
as a way to monitor my credit.
Tiller
Robinhood – One of the investments I track on Personal Capital is Robinhood. Robinhood is an
investment app popular with Millenials.
I wrote a review of my experiences with Robinhood in a previous article.
Final Thoughts
I used personal capital to achieve financial milestones, being Debt free after paying off the last
of my student loans and begin monitoring my investment returns. Apps like Personal Capital,
Mint, nerd wallet, learn vest, credit karma, and Credit Sesame, You Need a Budget (YNAB), etc.,
are suitable for monitoring where your money is going and your credit score. Personal Capital is easy
to track all your finances all in one place. Plus has some sound financial advice in regard to
index funds/mutual funds and fees.
Based on my experiences I recommend Personal Capital for anyone interested in improving
finances or staying motivated towards goals and financial milestones. The feeling of seeing the
hard work pay off, see potentially delayed gratification down the road is fun, and can be a
competitive fun way to improve finances and celebrate small wins, and significant steps accomplishments in financial goals.