Many a blog and website committed to rapid debt pay off will say that, besides an emergency fund, all extra moola must be placed on your loans. The Hubs and I disagree. Once we pay off our loans, we don’t want to spend an additional year or two saving up for big life purchases (ahem, houses and babies and trips around the world).
Therefore, we made the radical and uncommon decision to keep two savings accounts while also aggressively hitting our loans. One account is temporary savings – $200 a month meant for those rainy days when your car needs work or you gain 20 pounds and need fat pants. The other is long-term savings. We already had a little nest egg when we decided to tackle the debt. Instead of emptying it into a loan, we kept it safe and are adding $100 a month to it.
Here’s to rainy days and fat pants!
Today, you are most likely recovering from your spending hangover and realizing that something drastic needs to change in order for you to maintain a decent life while still attacking your debt. If you are single, this may be the time to call in re-enforcements. The fresh eyes of a trusted parent, close friend or lover might revive your budget and encourage your spirit. For the married folks, this is the perfect time to allow the more logic-oriented partner to insert their expertise.
In my case, today was the day that the Hubs wrangled our plan back from the heights of fantasy and grounded it in the stable soils of reality. In other words, living on $200 a week may kill our debt quickly, but jumping in cold turkey only set us up for failure. After much soothing and patient reasoning, I reconciled myself to the fact that having a larger spending budget (we are upping the ante to $250 a week) will actually help us maintain our goal. Though our loan payments may not be as large as I fantasized, we will at least be able to function like normal human beings.
Moral: to avoid spending hangovers, defer to logic and make a modest budget that allows for an enjoyable life.
Starting a strict budget and becoming a responsible adult is exhausting. You are more than likely going to snap. When you do, you are going to yell “EFF the world! I don’t care if we’re in debt until we’re 70, we’re going to live like a normal, civilized American!!!” and proceed to wreck your entire budget by throwing cash around like a drunk sailor finally arriving at a port of call. If this happens (which it most likely will), IT’S OKAY. To get through this period of the journey, take some advice: as long as you’re spending like a drunken sailor, you might as well drink like one too.
Until recently, every time I’ve entered a new job, I’ve called my father, read him the summary of all healthcare and insurance options, and dutifully waited for him to tell me which to sign up for. I’ve never understood, nor cared to understand, my options.
Once married, it’s a little babyish to ask your dad to make important decisions for you and your husband.
Therefore, the Hubs and I strapped on our thinking caps and tackled the foreign world of healthcare acronyms. Here is what we learned:
1) An HSA and an HRA are two very different things.
Health savings account
Health savings accounts are similar to a 401(k) retirement account for medical expenses. You can only have an HSA if you enroll in a high-deductible insurance plan. Here are other things you should know about an HSA:
- You own the account.
- Anyone can put money into the account.
- Money taken out of your paycheck by your employer for the account isn’t taxed.
- Money put into the account that’s already been taxed (for example, money that was a gift), is tax deductible.
- Money in the account can roll over from year to year.
- You can invest the money.
Health reimbursement arrangement
A health reimbursement arrangement is a benefit set up by your employer. It’s a fund that pays for medical expenses not covered by your health plan, such as deductibles, coinsurances or both. Other features of an HRA:
- The fund is owned by your employer.
- Your employer decides which expenses are covered by the HRA.
- Money given to you for medical expenses is tax deductible for your employer.
- You don’t have to pay taxes on money you get from an HRA used for qualified medical expenses.
- Your employer decides whether leftover money in your HRA can roll over to the next year.
- The money in an HRA can’t be invested.
2) An FSA is also different from the above.
Flexible spending account
An FSA is set up by your employer. They own the account, but you get to decide what qualified medical expenses to pay from your FSA. What makes it flexible? It works with most of our employer-sponsored health plans. Here are more facts about an FSA.
- Only you and your employer can put money into the account.
- You can only deposit money into your FSA through payroll deduction. That money isn’t taxed.
- Some employers let you carry up to $500 into the next year. Otherwise, any money left in the account at the end of the year goes back to your employer.
- You can’t invest the money.
3) Educating yourself on your healthcare and account options can help your budget.
By setting up an FSA with our employer and choosing an HRA plan, the Hubs and I are able to budget for medical expenses tax free. Because our employers own the accounts, we are never tempted to dip into them for other purposes. The money remains “out of sight, out of mind.” When an unexpected medical bill arises, we use our accounts to cover it instead of putting stress on our budget.
One of the best ways to understand your finances is to understand the person who provides them.
AKA your employer.
When the Human Resource office provides a special Human Resource orientation for new employees, you must attend.
Not only is it most likely required of you as a new employee, but also essential to your financial competence.
Bring a highlighter, take lots of notes, and resist the urge to nap.
After 12 days of choking down this swill they are trying to pass as beer:
The Hubs and I realized we hate cheap beer.
If you are drinking for the taste, there is none.
If you are drinking to get drunk, you won’t.
If you are drinking for a stomach ache and a horrible aftertaste, this is the beer for you.
We happily surrender to the fact that we are beer snobs.
Our advanced apologies to the budget.
It’s easy to skip out on the fun stuff when you are trying to save money.
So when $15 dollars falls into your lap, you spend it on fun stuff.
Trust me, it’s for your sanity.
Here is what you do:
- Pick a favorite restaurant (Our’s in the Chinese place down the road)
- Find a coupon/gift certificate for said restaurant (Apparently you get a lot of these when you move)
- Don’t forget your $15 dollars (It’s the cornerstone of the whole idea)
- Enjoy your entirely free date night! (During these trying times anything that does not come out of your budget is considered “free”)
It will be the best tasting meal you have ever had.