Regardless of your spending habits, there are lots of ways to Feed the Pig. While the savings from changing a single habit may not seem like much at first, making changes in a few areas of your life can add up to big bucks within a single year. Here are some of our favorite financial tips.
Weekly Savings Tip: Enjoying the Fruits of Your Labor Day
Labor Day was officially established as a national holiday 120 years ago as a tribute to the contribution American workers make toward the strength, prosperity and well-being of our country. As you celebrate the holiday next Monday, take some time to make sure you're taking full advantage of workplace savings options so you can afford to retire when you're ready. Here are a few of the more common options offered by employers.
- FSA/HSA: A FSA ( flexible spending account) or HSA ( health savings account) is an account tied to your health benefits that allows you to withhold money from your paycheck pre-tax in order to pay for healthcare costs. This includes things like doctor visit co-pays and prescriptions, in addition to items that aren't covered by your insurance, like contact solution, eyeglasses and other health-related costs. There are some key differences between the two types of accounts, including when the funds must be used by, so make sure you understand the details of the accounts offered by your employer before you make your selection. Both are great options to help you get, and stay, in the habit of building up an emergency fund.
- TSA: Similar to FSA's and HAS's, TSA's (transportation savings accounts) do the same thing for transportation expenses, like train fare or parking. Like FSA and HSA accounts, TSA's also act as "filters" that essentially "strip" the taxes from the money you spend on these items. For example, if your effective income tax rate is 25%, then you're saving twenty-five cents for every dollar you spend on these costs.
- 401k/403b/SIMPLE: 401k, 403b and SIMPLE accounts are different types of employer-sponsored retirement savings accounts that allow you to save a percentage of your salary for retirement and let it grow tax-free until you either begin withdrawing upon retirement or at age 70 ½. Many employers will also match a portion of the money that employees contribute to the account, which is additional compensation that you can't afford NOT to take advantage of. Even if your employer doesn't match your funds, you should be taking advantage of the ability to save pre-tax dollars—employer-sponsored retirement plans have higher contribution limits than individual retirement accounts and they make it easy by withdrawing the money from your paycheck before you even see it.
- ESOPs: If you work for a public company that is traded on a national stock exchange, your employer may offer an Employee Stock Ownership Plan (ESOP). These plans typically allow employees to buy a fixed dollar amount of company stock at a discount and free of brokerage fees through automatic paycheck withdrawals. Even contributing just ten dollars per paycheck can add up to a nice stock portfolio. You usually can't sell the stock you purchase while you're still participating in the plan, but if you discontinue participation or you leave the company, the stock will be yours, free and clear. Each company's plan is different, but if your employer offers one, you should consider participating.
Talk to your employer's HR team or a financial professional, like a CPA, if you have any questions or uncertainties about your current savings options. Have a safe and happy Labor Day!
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