Some Financial Tips for 2018

by Darwin on January 30, 2018

So, where to begin. It’s 2018 and there are several things to think about in terms of finances. Primarily, there’s the Trump tax cut which should start to show up in workers’ paychecks pretty soon in February once employers have W-4 updates.  With those extra dollars showing up both in your paycheck and then potentially larger tax refunds next year (primarily driven by increases in child tax credits and decreases in tax rates), perhaps it’s worth considering a different spending/saving approach.

New Investing/Savings Approach

There was another key change in the tax reform bill, which is that you can now use 529 plan dollars not just for college, but also for private schools if that’s something you have a need for.  My kids are public school so it’s not applicable, but many people choose to use private schools depending on where they live.  This can be of great benefit in a few situations.  One example is where you may have had plenty of funds saved up in a 529 plan, especially if maybe a grandparent is helping out with future college needs.  If that is the case, you would be much better off using those 529 funds for private school since it’s coming out of that tax-advantaged plan – which in many states, allows for state tax deductions.

Another favorite investing secret of mine is to put everything you can into a tax-advantaged HSA plan.  Many employer health plans off various options of low premium, a mid-premium with FSA and then a high deductible plan with HSA.  The beauty of the HSA is that it’s triple tax free!  That means anything you put in there first comes off your income before you pay any taxes on it in that work year.  Then it grows tax free.  And for the trifecta, when you use those funds down the road (could be 20 years down the road!), you don’t pay any taxes on those funds.  Call me crazy, but as far as I can tell, there is no other triple-tax free investment option that exists in the United States.  Now, some people think it’s wasted money, especially if they’re young and don’t have a lot of health expenses.  The thing is, this is as good as cash.  See, you WILL have plenty of health expenses in the future.  And it’s broadly used for things like glasses and other medical expenses you may not be thinking of.  Think of it as an enhanced IRA!

Spending Approach

While it’s rare to advocate spending recklessly, you’re going to be spending money this year.  You might as well spend it wisely.  I always try to optimize my spending benefits via a card like The Platinum Card® from American Express.  I basically try to charge everything I can and pay the monthly bills on time.  That way you’re getting the benefits of the card without it costing you anything extra.

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