Monday Night Finance- Volume 95

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Does all the financial advice you need still fit on an index card?

Have you ever wondered if personal finance advice could be boiled down to fit on an index card? Well, over ten years ago, Harold Pollack did just that, and his timeless wisdom still holds tremendous value today. Imagine having the keys to financial success at your fingertips: maxing out retirement contributions, wisely investing in low-cost, diversified funds, and sidestepping individual securities. Picture yourself effortlessly clearing your credit card balances, making the most of tax-advantaged accounts, and ensuring your financial advisor always has your best interests in mind. But here’s the twist: while most of these nuggets of financial wisdom remain as relevant as ever, some may no longer apply in today’s ever-changing landscape. Luckily, this article by Jim Wang of WalletHacks reevaluates Harold Pollack’s index card to see what works and what doesn’t in this new world of finance.

That said, I dislike the notion that you shouldn’t do this because other “person” knows more than you about this stuff. I’d add nuance to say that there’s no person on the other side of the table, it’s the market and the market doesn’t know anything. The market is the consensus of every participant and it’s also irrational.

Jim Wang, WalletHacks

In his article, Jim Wang strongly support’s Harold Pollack’s first two tips. Maximizing your 401(k) or equivalent employee contribution remains an excellent strategy, allowing the power of compounding to work its magic over time. While hitting the annual contribution limit might not be necessary, making the most of what you can contribute is a wise move. Secondly, investing in inexpensive, well-diversified mutual funds, such as Vanguard Target Retirement funds, remains a solid choice. However, both Jim (and myself for that matter) urge some caution with Harold Pollack’s 3rd piece of financial advice to avoid investing in individual stocks. While it’s true that many individuals can succeed by investing in ETFs and mutual funds, avoiding individual securities solely because others might have more expertise seems to be an extreme position. Depending on your risk tolerance and understanding of investments, owning individual securities and building your own portfolio can be another path to wealth. To explore other tips and delve deeper, check out the full article.

10 Common Blunders People Make Trying To Pay Off Debt

Debt can be an important tool. Imagine how many fewer people in the US would be homeowners if everyone had to pay cash for everything. However, if you’re not careful with how you use debt, you can end up overextended and facing a bleak financial situation. If you find yourself in a situation where you’re striving to pay off debt, it’s essential to steer clear of common blunders that can hinder your progress. These mistakes can make the process more challenging and extend the time it takes to become debt-free. This article by Claire Conway of Invested Wallet delves into 10 common mistakes people make when trying to get out of debt. She also offers insights on how to avoid them, ultimately helping you achieve your financial goals more efficiently.

Debt consolidation can be a valuable tool for paying off debt, but it’s essential to have a plan in place. Consolidating debt without a plan can lead to accumulating more debt and not paying it off efficiently.

Claire Conway, The Invested Wallet

Paying off debt is a commendable goal, but it’s crucial to avoid common blunders to make the process smoother and quicker. The number one mistake that Claire Conway of Invested Wallet highlight  is not creating a budget. A budget is like a map to get out of debt. Without it, it’s hard  to track expenses and find a path to getting out of debt. Another mistake people may make is to ignore the interested rate of their debt. Prioritizing paying off high-interest debt, like credit card debt can help save on interest charges. Depending on your level of debt, Claire Conway also suggests you may need to seek professional help. She also points out that you should continue to build an emergency fund, and work towards other financial goals like retirement contributions. For a comprehensive understanding of these mistakes and how to avoid them, read the full article.

Why I’m Switching From Lively to a Fidelity HSA

Many people confuse health savings accounts (HSA’s) with flexible spending accounts (FSA’s). While they’re both accounts that help you save money on your taxes when it comes to healthcare spending, HSA’s are far superior. Unlike FSA’s where you have to spend all of the money in the account each year, HSA’s allow you to grow a balance and even invest the money in stocks or index funds. If you’re considering opening an HSA or already have one, it’s crucial to make the most of this valuable financial tool. While there are a lot of options of where to put your HSA money, not all investment firms are equal. Luckily Kevin from Financial Panther shopped around and found the best possible company for your HSA.

HSAs are great because of the special tax benefits that they offer. They’re one of the only forms of triple-tax-advantaged savings available, where you can save money pre-tax, allow it to grow tax-free, and withdraw it tax-free. Whether it makes sense for you to get an HDHP so you can have an HSA will depend on your specific circumstances. But if you’re in a position where an HDHP makes sense, taking advantage of an HSA is something you should definitely do. 

Kevin, The Financial Panther

In this article Kevin (aka the Financial Panther) discusses his decision to switch his HAS from Lively to a Fidelity due to changes in Lively’s fee structure and cash balance requirements. He emphasizes the importance of selecting an HSA provider that charges no fees and has no minimum cash balance requirements, making Fidelity an attractive choice in this regard. If you, like me, haven’t looked at your HSA fees in a while, you might be shocked to learn you are being charged hidden fees. Keven also highlights the the advantage of investing in Fidelity’s ZERO Total Market Index Fund (FZROX), which has a 0% expense ratio, offering an excellent opportunity for tax-advantaged investing. Kevin does acknowledge minor downsides, such as Fidelity’s less intuitive interface compared to Lively. However, in the end, he recommends Fidelity as the top HSA provider for those seeking fee-free and tax-advantaged investing options.