I am a big believer in setting goals and taking action that move you toward those goals. Goals align your future with your current actions. They provide an incentive and guide for how you spend your time and resources.
To provide some background, my main financial goal right now is to be debt free, and my target date is April 2013. I have 3 months left on student loans, as well as around $8k on a car loan. My current actions involve paying more than the monthly payment while cutting back on other spending. As soon as my student loan is paid, I will snowball that amount into the monthly car loan. Once that loan is paid, I will snowball that same amount into savings and investments. Hopefully in the meantime, I can increase my income.
After purposefully signing up for an HSA enabled HDHP, I was slow to actually open the account (to the tune of 6 months!). I finally researched how simple it was to open an HSA and how well it fit my situation. I then took action by opening an account and integrating HSA contributions into my financial plan.
As I continue to fund my HSA month after month, I have developed the following goals to keep me on track, listed in order of ease:
- Save an HSA balance that covers 6 months of insurance premiums – I am nearly there on this one, with a current balance of $1k+. This provides piece of mind for an unexpected unemployment.
- Build up unreimbursed QME– paying for qualified medical expenses out of pocket builds up unreimbursed QME credits, which you can withdraw from your HSA to pay yourself back. This is a backup emergency fund, and by paying QME out of pocket, I increase this line of cash that I can tap if needed. It also protects my HSA in order to let it compound and grow.
- Cover my deductible – Heaven forbid I ever have a medical emergency, it would be great to have my entire deductible in my HSA at my disposal.
- Max out my HSA each year – The maximum contribution for HSA accounts is $3,100, which equates to a monthly contribution of $258. Currently, I am only contributing $160 per month. I would like to increase this to $200 per month. As I am tracking lower than the max, I may make a catch up contribution towards the end of this year if I have some cash lying around.
- Invest my HSA – Given my views on health care and the advantages of an HSA, I want to be in the HSA for the long term. Soon, I will break off part of my HSA and invest it via a brokerage, with a time horizon of 30-40 years. In the end, this will be a nest egg for health expenses, or if I am fortunate, to supplement my retirement.
In order to achieve these goals, I am taking the following actions:
- Automated Savings – I have automatic contributions established for both my HSA and emergency fund. This takes the work (and ‘forgetting’) out of saving and keeps me on track every month.
- Pay QME out of pocket – Using my monthly budget, I try to pay nearly all of my QME out of pocket. This allows my HSA to grow while providing me the benefit of tax-free reimbursement in the future.
- Investment Planning – I am a little ways off from being comfortable investing my HSA. However, that day is drawing nearer. To prepare for this, I am considering my risk tolerance for this account. How much do I want to keep liquid, how much should I invest, and how much risk am I comfortable? After deciding this, I will determine an asset allocation for my HSA, or what investments I will purchase.
Obviously, health care comes first and attending to any sickness / emergencies that arise is goal #1. Remember, health is true wealth. Beyond that, I follow these goals to provide some financial soundness to protect my health in the future.