Use Your Budget to “Increase Your Paycheck”

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

I recently celebrated another birthday. I was disappointed when I remembered that, while my toys have gotten more expensive, they do not bring me even a fraction of the excitement a new set of Legos did when I was 6. But upon reflecting on some of the financial changes I’ve experience over the years, one thing I noticed is the lessening of financial stress. When I consider all of the things that have helped alleviate this stress, I find that some of the most impactful were also some of the most subtle.

Like most people, the most important thing for relieving financial stress is having a budget. Now I’m not going to launch into a speech about how budgets work and why we need them. Instead, I wanted to discuss two similar strategies that fall under the radar for most people and that are possible only by using a budget. The benefit I have personally experienced has allowed me to free up more cash in our budget, making it feel like an increase in your paycheck.

As an Insurance Advisor at Carson Group Partners, I spend much time reviewing insurance policies, including premiums and payment schedules. Many insurance policies offer a monthly premium payment option. What may not be clear, or not initially sound like a big deal, is the additional cost that insurance companies will add if you pay on a monthly basis. In my experience, I have found that people will often choose either annual or monthly premiums schedules when they purchase their first insurance policy and rarely change as time goes on. What is often missed is how much those additional monthly costs can add up over the course of a year or many years. The policy is the same, but the cost is higher.

This is not to say that paying monthly is a mistake or bad.  Sometimes it is most efficient from a cash-flow standpoint to spread payments over a period of time. That said, unless there is a compelling reason to be paying monthly, it is in your best interest to utilize your budget, position it to be able to pay lump-sum, annual premiums and then enjoy the extra cash flow throughout the year.

On a similar note, many employers now offer two types of health insurance coverage to employees: what I’ll refer to as “traditional” coverage characterized by (relatively) low doctor visit copays, prescription copays and coinsurance and high-deductible or HSA-qualified plans. The prior is typically more expensive on a monthly basis and often has greater, overall out-of-pocket maximums. The latter is characterized by few or no copays. Instead, HSA-qualified health plans require that qualified medical expenses are fully paid by you but are deducted from your out-of-pocket maximum and, should you reach that number, most (if not all) further medical care is provided entirely at the insurance company’s expense. One reason people shy away from these policies is the idea of having to pay all their annual costs, typically totaling thousands of dollars, out of pocket before the insurance company will pay anything.

Evaluating which is right for you does require some careful review of how frequently you need to visit the doctor. But if it is reasonably certain that you will hit your out-of-pocket maximum regardless of which plan you select, it may be significantly more efficient to select the HSA-qualified plan. You may find that the total out-of-pocket maximums come in lower than traditional plans and oftentimes there is an HSA (health savings account) available that offers even further benefits via tax savings. Here again, a budget is vital to allocate the funds necessary to meet medical expenses until the insurance company picks up.

I hope that these seemingly simple strategies are something that you either are or can begin to position yourself to take advantage of so that you can enjoy what feels like a little bump in your paycheck.

 

Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

Let’s Talk About Midterm Elections and Your Investments

This week was midterm elections and we’ve had many questions about what it all could mean, which we’ll tackle in today’s blog. We consider it a great honor to vote, and while we may not know the final results of the election for days (or even months), what we do know is the election will …

3 Nontraditional Ways to Give That Still Qualify for a Tax Deduction

Kevin Oleszewski, Senior Wealth Planner ‘Tis the season to give. In fact, 37% of charitable giving occurs during the last quarter of the year — 20% of it in December alone, according to a survey conducted by the Blackbaud Institute. And while the holidays are traditionally a time to reflect …

Considering Tax Loss Harvesting? What You Need to Know First

Kevin Oleszewski, CFP® Senior Wealth Planner As the tax year draws to a close, many high-income investors will look to reposition their portfolios to intentionally generate losses as a way to offset gains — an investment strategy known as tax loss harvesting.
1 2 3 83 84 85

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation