Category Archives: Money Management

Avoid These 5 Gross Banking Fees

This post is part of a sponsored campaign with Radius Bank. Radius Bank has not directed my content or my views.

I didn't even know I was paying half of these bank fees! Definitely time to switch!

I get that banks have to make money.

And I’m totally cool with them making money off of my auto loan or balance transfer fees.

What I’m not cool with is banks making money off of my deposit accounts like checking and savings. When I put that money in the account, they turn around and use it to invest in other assets, which is why I earn a small amount of interest on the money I keep in there.

It’s advantageous for banks to have my business in this way. Even if they don’t make an incredible amount of money off of my not-jumbo-sized deposits, they do open a door to market their lending products to me as a warm lead.

And it’s advantageous for banks to have your business, too. With that in mind, make sure you’re not keeping your money with a bank that charges one of these gross fees.

Maintenance Fees

Some banks will charge you a monthly fee just to have a checking account with them. It’s disgusting and unnecessary. If a bank is charging you for a deposit account, ditch them like a bad date.

Minimum Balance Fees

Other banks will charge you a fee if you don’t keep an average daily balance of $X,XXX in your account. This is exploitative, especially when we’re talking about checking accounts, which get many American families from paycheck to paycheck without a whole lot leftover.

Minimum Deposit Fees

You incur this fun fee when you don’t meet a certain threshold for direct deposits every month. I resent this fee as a freelancer with irregular income who doesn’t always get paid through direct deposit.

I also resent it because it’s a poor tax. You’re punishing people who don’t make a lot of money by taking more of their money. It’s super unethical in my opinion. So not with it.

ATM Fees

I’ve been doing online banking since 2006. One thing I’ve always liked about that is that the financial institutions I’ve worked with have never charged me an ATM fee for using an out-of-network cash machine.

They’ve also always refunded my ATM fees if they are charged by the owner of the ATM. So let’s say Bank XYZ charges me for using their ATM while I’m on a road trip. I have to pay $2.50 to get money out of my account. At the end of the month, my financial institution would refund me that $2.50.

If your bank is charging you money in order to access your money, it’s time to call your relationship quits. You can do better.

Overdraft Protection Transfer Fees

Most banks won’t charge you to set up overdraft protection, which links your savings account to your checking account. Should you ever spend more than you have in your checking, overdraft protection pulls money out of your savings account to make up the difference. If you don’t have protection, you’re usually charged a hefty fee for overdrawing your account.

However, some banks are sneaky and will charge you when you need to use that protection. These charges are called transfer fees, and they’re ridiculous. They allow banks to say, “We don’t charge you a fee to enroll in overdraft protection!” while still charging you should you ever have to actually use overdraft protection.

Which is shady as all get out. Find a bank that treats you better.

Find Someone Who Treats You Better

These are all common fees, believe it or not. You may even be paying some of them without realizing. I’d encourage you to get out your latest account statement and check.

If you are, know that there are other fish in the sea. Credit unions are a great place to look, but I also recently became aware of Radius Bank’s Hybrid Checking Account, which does not charge any of these fees. On top of not being sketchy with their fee structure, they also allow you to deposit cash at certain ATMs–even though they’re based online. Which is pretty cool.

Make sure your bank doesn’t charge you gross fees. And if you discover they’re a little grimy, walk out the door and don’t look back.

 

How I Save Money by Paying for Amazon Fresh Every Month

Today’s author is Chris from The Master Dukes of Dollars. The Master Dukes of Dollars are the dynamic duo from The Duke of Dollars Kingdom. The two bloggers held court frequently, delving into lifestyle and personal finance discussions as they searched for ways to live an optimal life, eventually deciding to invite a global audience into their mindsets by establishing their own blog together. They believe anyone can build their financial kingdom – start building today!

This sounds like it just may be worth the subscription fee to not have to go to the grocery store and have food delivered to my door.

Are you a basket or a cart person? 

A question we all have to ask ourselves when we decide the frequency of our trips to the good ol’ grocery store. Depending on your drive, you may go less frequently and choose to buy in bulk (cart person), or more regularly because lucky you – the store is on your way home (basket person).

Do you have children that tag along?

I remember being the cart driver, seeing how fast it could go to glide from one end of the aisle to the other, my mother or father giving me the glare as the cart slowly made its way back to them. “I told you, Chris, you’re going to hurt yourself doing that – don’t do it again!” And who can resist using the cart as a scooter? I still do that as a fully functional adult!

Have you ever dreamed of what the world could be without the necessary time-waster of grocery shopping?

Dream no longer! In this guest post, I want to prove to you that you can save time by paying to have groceries delivered right to your door: leaving you with more time to Netflix, video game, read, or do pretty much ANYTHING. There is nothing more in my life more frustrating than walking BACK AND FORTH, UP AND DOWN, ALL AROUND those blasted aisles searching for the last item on my list. It drives me NUTS!

#endGroceryRant and #beginProof

Before getting started with the products to satisfy our rumbling bellies, I want to dive into correlating your life hours–which are constantly ticking down–with $$.

Your Real Hourly Wage (RHW)

What is it?

Your real hourly wage is the true hourly rate it takes you to earn the money deposited into your bank account each paycheck.

The hourly rate or annual salary (per 40 hours worked) that defines your gross paycheck doesn’t directly match the amount of time you spent to earn that money. It excludes common activities like commuting, getting ready, or gassing up our car.

By including all of these factors, you determine the real dollar amount you make per hour of your time.

Here’s a free calculator to help out: Real Hourly Wage Calculator

Why does it matter?

This isn’t about working at your regular job, but about the potential opportunities in your life. Every single hour of your day, whether it’s a working or not, has an opportunity cost to you.

Your job may have overtime pay, but you aren’t taking advantage of it. You could pick up a second job that does pay by the hour. You could be spending your time working on a side-hustle or passion that brings in new gold for your savings treasure chest.

Free-time and passions that bring joy to your life don’t have an exact price, but I love to use my real hourly wage to calculate the cost of enjoying (or pursuing) them.

Why?

Because my [pursuit of] happiness and the people in my life are worth every single penny of time spent for them. 

Discounting your RHW

Whenever I calculate my Real Hourly Wage, I take a % off the top to reflect the fact that I can’t just go out and earn it immediately. If I have an active side gig that I can do from the comfort of my couch at any hour I please, then I eliminate the cut.

A parent with a full-time job and no potential for overtime should take a hefty percentage off the headline number, because it’d be especially hard for him or her to pull in the money. I try to end up with a number that’s a pretty accurate reflection of my moonlightability.

Prioritizing

Unfortunately, that same time we cherish is limited. We need to divvy it out for the highest priorities – by using your real hourly wage, you can better do so.

Quick example: Taking a walk at one of your nature trails may cost you an hour of your time (or $20 RHW), but the health benefits of reducing stress, seeing the sunset, and working your muscles help you much more in the long run by reducing health costs.

Amazon Prime & Fresh

Grocery delivery isn’t offered everywhere, but in my city, Amazon (and others) offers it if you have a Prime account.

Amazon Prime

I currently have an Amazon Prime Membership, although this may change in the future as they increase prices, but mine cost me $50 annually at the moment. There are three main reasons it is worth the cost to me:

  1. 2-day shipping
    • For prime eligible products on Amazon, you are able to choose 2-day shipping at no extra cost.
  2. Lending library
    • Borrow 1 book at a time from the lending library (limited amount of books) for free with your membership
  3. Prime Video
    • Amazon’s video streaming service, which is like Netflix but offers different content and originals

This year alone I was able to watch ~25 James Bond movies (which cost at least $5 individually) and all seasons of Monk (8 seasons that cost ~$80) each on the service.

Two-day shipping numbers?

Too many to count!

Amazon Fresh

Amazon’s grocery service cost an additional $15 per month for Prime members in select cities. It comes with a free trial month, so you can test it out without spending a dime. One thing to note: there is a $10 delivery fee for orders under $50.

I haven’t done hardcore price analyses, but from someone who grocery shopped in the same store for 2 years, I was able to find similar items at similar prices most of the time. The big ticket item for me was meat expenses because they don’t have sales on expiring meat online.

Side Note: This required me to give up on the “no grocery store visit” policy and adapt. Typically, I buy snacks for late night blogging sessions and take a look at the meat clearance. This takes <15 minutes on one weekend night and works well for me because the library is close to the grocery store.

If this isn’t an option for you, then it is possible that your meat category expense could increase (depending on what you buy), but overall the time saved could be worth it!

My Experience

With Amazon Prime and Amazon Fresh, I am able to order groceries online which has SAVED ME SO MUCH TIME.

When Grocery Shopping Was a Dragggg

Sunday afternoons. Ahhhh, dreadful Sundays afternoons!

I created a grocery list to cover any recipe ingredients that were missing from the pantry or fridge, grabbed my headphones, and drove to the store. Even with my familiarity of the floorplan, grocery shopping took at least 120 minutes each week of the month (including drive time).

On average, I spent around $75 on groceries and $15 on misc items – totaling to around $350 a month!

$350 grocery bill + (8 hours of grocery shopping time * $20 RHW) + (4 hours of recipe / inventory checking * $20 RHW))=  $590 total

After Grocery Delivery Became a Reality! 

It was time to put this new service to the test with my first order! Honestly, the first time, I wasn’t impressed. Finding items wasn’t the easiest and the paradox of choice was very real. But I stuck with it and am so glad I did!!

Paradox of Choice is a concept introduced by Barry Schwartz in his 2004 book by the same name. In short, it means that being faced with too many options can be paralyzing and fail to add value to one’s experience of selecting the item that will bring him or her the most utility.

There are three huge benefits and time savers to ordering from Fresh:

  1. Past Items
    If you are a creature of habit (like most humans), then you have the tendency to buy repeat staple items at the grocery store. By clicking over to your past orders, you can add all of the staples you need to refill in about….2 minutes…..right from your favorite chair while watching Netflix. So serious! Protip: Combine repeat purchases–especially of nonperishables–with a price tracking service like CamelCamelCamel to score the best deals.
  2. Searching
    The frantic scamper from aisle to aisle to find that one particular item can be a thing of the past! Need Sweet Potatoes? Type “Sweet Potatoes,” wait 2 seconds, add them to your cart.
  3. Pantry Inventory
    Do I have enough butter? I know I have one or maybe two sticks left.Should I buy more to be safe? This recipe needs at least 1.5.Who knows right?I’m already at the store! With grocery delivery you just take a few steps over to your kitchen, open up the fridge, and count your butter sticks. BOOYAH there was only 1 – add to cart.Success!

Utilizing these main benefits, searching for items after finding a recipe is a breeze. I now spend ~20 minutes to grocery shop each week and less time recipe/inventory checking.

$350 grocery bill + (1 hours of grocery shopping time * $20 RHW) + (1.5 hours of Recipe / inventory checking * $20 RHW) + $15 Fresh Membership)=  $415 total

Paying Myself for My Time

From the two different totals above, you can see I now save a total of $175 or 8.75 hours of my time per month. Multiply it by 12 and I’m up to $2,100 or 105 hours (4.3 days) this year!!!

Let’s just say I invested that $2,100 this year in an S&P500 index fund, let it sit for 30 years at 7% return and 3% inflation for 30 years. Say hello to ~$16,000 for retirement!!

Utilizing the 4% rule you can withdraw enough to cover $640 worth of groceries each year, and that’s only if you never invest in that account again.

Hi, guys! Femme here! Just wanted to note real quick that even if you leave RHW out of the equation, Chris was able to get his groceries at the same price and only pay $3.75 per delivery, assuming he continued to shop once per week. I’m thinking at that price a service like this might just be worth it…

How to Invest in ABLE Accounts

In honor of Autism Acceptance Month, Femme Frugality is running a series of Monday articles focusing on the triumphs and challenges autistic people conquer as related to their finances and careers.

Joining us this week is Tara Falcone, CFP®. Falcone is a CERTIFIED FINANCIAL PLANNER™, former Wall Street analyst, and founder of ReisUP LLC.

ReisUP is an early-stage financial services company dedicated to increasing investing education and access for everyday investors. Her mission is to empower people to “rise up” and play a more active role in achieving their financial goals. 

Totally sending this to my sister! How to invest in ABLE accounts.

Last week, we kicked off our Autism Acceptance Series by looking into a new financial vehicle: ABLE Accounts.

ABLE accounts allow disabled individuals–or their guardians–to stash away some money without having to worry about failing an asset test when they go to apply for state or federal benefits. These accounts can also be used to grow your savings tax free.

There are currently thirty-three states that offer ABLE accounts–plus DC. For simplicity’s sake, we’ll be looking at only Pennsylvania’s investment options today, though the same concepts can be applied in generality.

What are ABLE investment options?

The PA ABLE account has the following seven allocation options:

  • High-yield checking account
  • Conservative Investment Portfolio
  • Moderately Conservative Investment Portfolio
  • Moderate Investment Portfolio
  • Growth Investment Portfolio
  • Moderately Aggressive Investment Portfolio
  • Aggressive Investment Portfolio

“The Conservative and Moderately Conservative options invest 70-90% of their portfolios in cash and bonds, with the rest (10-30%) invested in a variety of stocks,” says Tara Falcone, CFP® of ReisUP LLC.

“The primary goal of these investment options is to preserve your principal, which is the money you deposit into your ABLE account, while offering limited to small returns on your investment. Small potential risk equates to small potential reward.

“The Moderate and Growth options’ portfolios are split roughly 50/50 between bonds and stocks. These investment strategies focus less on principal protection and more on generating a slightly higher return on the invested assets. Moderate potential risk means moderate potential reward.

“Finally, the Moderately Aggressive and Aggressive options are invested primarily in stocks (75-90%) with a small portion of the portfolios invested in bonds (10-25%). These options’ primary goal is to achieve the highest growth possible with little regard for principal preservation.”

Figure Out Why and How to Invest

Before making any investment, it’s important to identify why you’re investing, and what limitations your specific life situation may impose. Falcone advises looking at the following factors before choosing your allocation strategy.

Risk Tolerance

Investments are not stagnant. At times they’ll go up, and at others they’ll go down. Your risk tolerance is how much sleep you’ll lose over that fact.

“Generally, more conservative investment options are less volatile, meaning your account balance fluctuates less,” Falcone explains. “However, that also means it’s unlikely to grow as much since less risk yields less reward.”

“Meanwhile, aggressive options typically generate larger investment returns, but also subject your account balance to bigger positive and negative swings. This could put you at risk of not having sufficient funds to cover expenses when you need it.”

Time Horizon

How long can you let your money sit without touching it?

That’s your time horizon.

“If a beneficiary needs to access a large portion of his or her ABLE account every year to pay for qualified expenses, a conservative investment strategy is likely more appropriate,” explains Falcone. “If someone in this situation were invested more aggressively, they may discover that their account balance has decreased in a market downturn, leaving them unable to pay for current expenses.”

If, however, you’re saving to provide for your child after you’re gone, you may have a longer investing horizon.

“Someone with a longer investing horizon who doesn’t need to withdraw a large portion of their account for five or more years may want to consider a moderate or aggressive option,” says Falcone.

“The larger growth potential inherent in these investment strategies could allow that person to take greater advantage of the tax-free growth nature of ABLE accounts. In this case, the beneficiary should consider reallocating to a more conservative strategy as the time when they will need to withdraw money from their account approaches.”

Savings Ability

“In theory,” Falcone continues, “the more someone can deposit into their ABLE account every year relative to their expected expenses, the more aggressive they can afford to be from an investment perspective.”

Check out this example with Ella and Ari:

This is worth clicking through. An in-depth guide on how to invest in one of those new ABLE accounts for either you or your kid--whoever has a disability.

 

Overall Goal

There are two basic reasons ABLE accounts are so attractive. The reason you were drawn to it probably says a lot about your overall goal.

Reason #1: Savings isn’t counted for asset tests.

If you’re applying for government benefits like Medicaid or SNAP, savings in your ABLE account will almost never count against you. This is important when you’re trying to build up savings for medical equipment, therapies, or even just a basic emergency fund that you will need in the near future. In these cases, Falcone notes that a conservative approach is probably the best fit.

Reason #2: You’re taking advantage of the tax-free growth.

If you’re saving for your child’s future but don’t have a large enough nest egg to justify a special needs trust, ABLE accounts are particularly attractive due to their tax-free growth. Falcone notes that any time you’re making a longer-term investment, you can afford to be more aggressive.

It is possible that you’re taking advantage of both perks. You’re saving large sums of money for a date far off in the future, but are only able to do so because that savings won’t count against you in an asset test. In these cases, Falcone says you can yet again afford to be more aggressive.

Risk Capacity

While risk tolerance is how you feel about the volatility of your investments, risk capacity looks at the risk you can take on from a concrete, objective perspective.

“Due to the assets test that owners/beneficiaries of ABLE accounts must pass in order to qualify for Medicaid and other social programs, risk capacity is arguably the most important factor to consider in these unique circumstances,” notes Falcone.

“Asset tests often prevent families with disabilities from building substantial emergency funds that could cover expenses temporarily should the ABLE account balance drop in a market downturn. Therefore, even though someone may be comfortable with more investment risk, he or she may not be able to afford being exposed to such risk due to lack of other cash sources.”

If you have friends and family who want to contribute, but you also want to extend your investment time horizon, you may want to direct them to specific bills that they can pay rather than making contributions to the ABLE account.

Falcone points out that this keeps your money in your account as a long-term investment while keeping it out of your regular checking account where it would be counted in an asset test.

How should I invest with my ABLE account?

Wondering what you should do in your specific situation? Below you’ll find Falcone’s recommendations for some common circumstances individuals or families may find themselves in.

While this advice speaks to generic situations, it’s always advisable to talk with a professional about your own, unique set of circumstances before making any investment.

High-Yield Checking Account

  • Someone with no risk tolerance. They are not willing to put any of their funds at risk to earn even a small return.
  • Someone who needs the ability to withdraw funds immediately. Otherwise, withdrawal proceeds can take 3-10 days to reach the beneficiary in Pennsylvania, per the Program Disclosure Statement.
  • Someone who is already the beneficiary of a special needs trust or has some other fund/account/support to help pay for future expenses. They don’t need the benefit of the tax-free growth nature of an ABLE account, but want to shelter more funds from the asset test.
  • A disabled adult with current cash need, desire to shelter some assets from the asset test, and/or desire for some financial independence to purchase/pay for things on their own.

Conservative Investment Portfolio

  • Someone with very low risk tolerance.
  • Someone with no or insufficient emergency fund (i.e. low risk capacity.)
  • Someone with potentially large unexpected expenses.
  • Someone with a present need for cash (i.e. short investing horizon of less than 2 to 5 years.)
  • Someone whose primary goal is to shelter funds from the asset test, not earn a substantial return on those funds.

Moderately Conservative Investment Portfolio

This investor will display similar criteria to Conservative, but is willing to give up some principal protection for slightly more current income.

Moderate Investment Portfolio

  • Someone with moderate risk tolerance and moderate risk capacity.
  • Someone with high risk tolerance and low risk capacity. They’re comfortable with volatility, but can’t necessarily afford to lose money in the short-to-medium term.
  • Someone with low risk tolerance but high risk capacity. They’re not as comfortable with investment volatility, but can afford to take on some risk to earn a potential return.
  • Someone with infrequent but potentially large unexpected expenses.
  • Someone with a medium-length investing horizon of 5 to 20 years–perhaps a parent saving for their child’s future expenses, including education.
  • Someone who wants their money to earn a slightly higher return.
  • Someone who has access to other cash sources or temporary support in the event of a market downturn.

Growth Investment Portfolio

Will display similar criteria to Moderate, but is willing to take on slightly more risk for slightly more capital appreciation potential.

Moderately Aggressive Investment Portfolio

  • Someone with a high risk tolerance.
  • Someone with a high risk capacity (i.e. sufficient emergency funds or other cash/support sources.)
  • Someone with a long investing horizon and desire to benefit most from ABLE’s tax-advantaged growth. This could be parents who want to set aside funds for their child’s future needs and want those funds to earn a substantial return.
  • Someone who already has a special needs trust or is seeking an alternative to a special needs trust. One example is parents with a young disabled child or young adult.
  • Someone who has a low savings capacity now, but a large future capital or income need. One group that may fit this profile is parents wanting to establish a fund to pay for their child’s needs upon their death.

Aggressive Investment Portfolio

These investors will display similar criteria to Moderately Aggressive, but to a larger extent for each point. Even more comfortable with risk, even longer investing horizon, even greater future income or capital need, even more sources of additional support, etc.

Evaluate, but don’t mix and match.

Falcone advises against investing in multiple different portfolios at one time.

“Allocate 100% of your account balance and future contributions to whichever investment option you choose,” she says. “Mixing them changes the overall allocation and therefore the resulting investment strategy. For example, allocating half of your account to the Conservative option and half to the Aggressive option results in a combined portfolio similar to the Moderate investment option.”

She says the only exception would be if you needed some cash on hand in the high-yield checking account, but wanted to invest the surplus.

Falcone leaves us with these final words of wisdom:

“No matter which option you choose, make sure to re-evaluate your choice every year and make appropriate adjustments if your circumstances and/or goals have changed.”

ABLE Accounts for Autistic People

In honor of Autism Acceptance Month, Femme Frugality will be hosting a series of Monday articles that focus on the financial challenges and triumphs that autistic people face and achieve. When they are children, these things also tend to affect their family’s finances, as well.

Pinning this for my sister who has an autistic daughter! Will help them actually be able to save money because they can't right now because of state asset tests. So messed up.

 

If you are on the autism spectrum, or your child is on the spectrum, it’s likely that you incur some costs that neurotypical people simply don’t. There may be therapies, adaptive equipment, nutritional supplements or even legal fees related to autism that end up in your budget.

Fortunately, in recent years these financial burdens have been acknowledged. With the passage of the ABLE Act, people with qualified “disabilities”–or their guardians–now have the ability to open an account built specifically to deal with these added expenses.

I was incredibly psyched when an advisor let me know Pennsylvania was rolling out theirs last year. Since PA is the state I’m most familiar with, the PA ABLE account will be the one we dissect today, but other states have similar options. You can view them at the end of this article.

What is an ABLE account?

An ABLE account is a tax-advantaged investment account. It serves as a way for those with “disabilities” to save for expenses related to their condition–in this case, autism. Families are also able to save for their minor children in this way, or through a power of attorney if their child is an adult in need of assistance.

ABLE accounts are 529 accounts, which means that most of the time the money you put in them is invested. If you’re familiar with these accounts for college savings, it’s a very similar thing except the scope of qualified expenses extends beyond just post-secondary education.

ABLE accounts are also advantageous because they don’t count against many state or federal programs that require asset tests, allowing people on the spectrum to save for future costs without worrying about losing their healthcare or other necessities.

How do you qualify for an ABLE account?

If you live in Pennsylvania, you’ve likely gone through the rigamarole of applying for SSI so you can get on Medicaid. If your income is low enough, you get SSI payments. If it’s too high, you don’t get the SSI payments, but SSI confirms that you have a disability so you can get state-sponsored insurance.

If your autism has been confirmed by SSI, you qualify. Other ways you can qualify are through entitlement to SSDI or a signed confirmation of disability from a physician. They must also certify that you received your diagnosis before age 26.

Invest in an ABLE account for your child's autism expenses and watch your savings grow tax-free.

What is a qualified expense for an ABLE account?

In Pennsylvania, qualified expenses are any expense related to the “disability.” That includes:

  • Tuition for school–Pre-K through post-secondary
  • Books and other supplies related to education
  • Mass transit expenses
  • Purchase of a vehicle
  • Modification of a vehicle
  • Moving expenses
  • Job training
  • Expenses related to gaining/maintaining employment
  • Health expenses across the realms of mental, physical, vision and dental
  • Health insurance premiums
  • Durable medical equipment
  • Respite care
  • Therapies
  • Communication services/devices
  • Personal assistance
  • Nutrition management
  • Financial management
  • Legal fees
  • Funeral and burial expenses

In addition, you can use it for these housing-related expenses tax free, though withdrawing money for any of the below may impact your SSI benefits:

  • Primary residence expenses
  • Rent
  • Mortgage payments
  • Property taxes
  • Home improvements or modifications
  • Utilities

This is by no means an exhaustive list. You can use the money for anything related to the associated “disability,” and it doesn’t necessarily have to be deemed medically necessary. Just remember to keep good documentation about what you’ve spent the money on. If the IRS ever audits you, they’re going to want to see receipts.

Check out other qualified expenses under PA ABLE.

How much can I save in an ABLE account?

You can save $15,000 per year. If you have family or friends that want to contribute, their generosity counts towards that $15,000. There are some federal exceptions to this cap–for example, if you bring in income, you’re allowed to save more–but states are still trying to work out their own rules which may be more restrictive than the federal policy, which just changed at the tail end of 2017.

The max amount you can have in an ABLE account at any given time is $511,758 in the state of Pennsylvania. This max number will vary from state to state. If you are a parent or guardian who is saving for a child, once you reach this point you may want to talk to a professional about a trust or even a special needs trust.

What are the tax advantages of saving in an ABLE account?

You contribute money after you’ve already paid taxes, so contributions won’t lower your AGI on your taxes. However, the money is allowed to grow tax-free, and as long as your withdrawals are made for qualified expenses, you won’t have to pay taxes when you take the money out.

If you spend the money on an unqualified expense, though, you will be hit with a penalty.

With the new tax law, you will be able to apply your ABLE contributions to the federal Savers Credit. The details are still fuzzy, and there may be some retrictions, but this is actually one good aspect of the legislation, which has otherwise set into motion threats to the health and well-being of the disabled.

You don’t necessarily have to live in a state to purchase its plan. For example, PA ABLE is available to people in all 50 states–not just Pennsylvania. On this particular plan, you might end up paying state taxes on your gains if you’re from out of state. Pennsylvania residents are exempt, and also won’t pay state taxes upon a qualified withdrawal.

Pennsylvania residents also benefit from exemption from the PA inheritance tax. Check with your state to see what benefits may be available.

Stop worry about asset tests and start building savings with an ABLE account.

Will an ABLE account mess up my state or federal benefits?

ABLE accounts are not considered for SNAP benefits or any other federally-distributed benefits with means-based tests, save for SSI.

Typically, SSI limits your assets to $2,000, but ABLE accounts are a little different. They won’t count the first $100,000 in your ABLE account against you for SSI qualification or the determination of your dollar-amount benefits.

Separately, the state of Pennsylvania has passed legislation that prohibits your ABLE balance from being used in any asset tests related to health or disability. They’re also not allowed to use it for SNAP per the USDA’s issued guidelines.

What about financial aid for college?

In the state of Pennsylvania, PA ABLE savings will not count on applications for state-based financial aid.

Because ABLE accounts are not supposed to be counted on federal means-based tests, the general assumption is that these savings should not be included on the FAFSA. However, as far as can be told the US Department of Education has not issued any guidance on this to date. You may want to call the Federal Student Aid Information Center to get the most up-to-date information.

Do not count ABLE savings on other children’s FAFSA applications.

What are the fees?

You can avoid all administrative fees by getting your documents delivered electronically. Investment fees are between 0.34% and 0.38% depending on which option you pick.

Picking an option–from conservative to agressive–is something we’ll be tackling in a future post. Saving for college with a 529 is one thing, but saving for expenses related to autism that come up as a part of your daily life is quite another all together.

Rent isn’t something you’ll be paying in 30 years–it’s something that’s due now. If you need an iPad to communicate,  you’re not going to wait for 15 years of appreciation on your investment before you start to exchange information with the world.

But that isn’t to say the most conservative option is the best choice each and every time. It’s complex, and something we brought an expert in to cover.

functional fashion modern frugal mom

Are ABLE accounts worth it?

While the fees may not be the lowest, the account is tax-advantaged and allows you to use your money before retirement age. It also allows you to save for future expenses without disqualifying yourself from certain federal and state means-tested benefits.

If you’re a parent, you may not be sure if your child will go to college or not. An ABLE account gives them the flexibility to pursue whatever occupational or educational path they want and are able to when they get to that point in their life.

Or, if you come up against a financial emergency between now and then because of your child’s medical, communication or educational needs, you have the money there to save you from financial distress while still providing the best for your kid.

Overall, it’s a much-needed solution that many individuals and families will be able to use to their advantage. With so many frustrating lines of red tape around every corner, it’s good to see that this issue is getting some recognition and legislation.

Other states with ABLE accounts

Note that not all state plans are created equally. Don’t pick a plan simply because it is based in your state or think that because your state doesn’t offer a plan, you’re not eligible. Fees, residency requirements and state tax advantages are all going to vary. Do further research before opening any financial account.

Favorite Free App: Debx

I have received compensation for the writing of this post. Regardless, all opinions are 100% honest and 100% my own.

I've always been afraid of wracking up credit card debt, but this app pays it off everday for you--and you get to collect travel rewards. Amazing!

When I was younger, I was petrified of debt. There was no degree or travel reward that could convince me taking on credit was a good idea. I had a couple of car notes, but they were small, and I paid them off quickly.

A few  years ago, I had a change of heart. I realized the power of travel rewards, and knew myself well enough to trust that I would pay off each and every purchase as I made it. And I did. It was an exercise in vigilance, though.

I avoided carrying any credit card debt in my name until last year, when health insurance premiums tested the constraints of our income. It’s something I’m working my way out of right now, and had less to do with good money habits or tempting incentives and more to do with medical necessities for our family–which absolutely need to be more affordable in our country. (And yet–shouldn’t disappear. I’d rather carry a bit of medical debt at 0% interest than not be able to get my family services they need and depend on to live.)

Life with Travel Rewards

Travel rewards have been good to me. They’ve allowed me to take my family to Myrtle Beach during peak season while paying virtually nothing for the hotel, score a free hotel room more than once while we were traveling for funerals and other family trips, and cancel out other travel costs like subway fares and bus tickets.

In my latest win, they’re getting me two free tickets to Japan, and a free night in a hotel in Tokyo–which would usually cost north of $500.

But if you want to do this, you absolutely need to pay off each purchase to avoid interest charges and late fees. You must do this at the end of every billing cycle at bare minimum, but I prefer to do it each and every time I make a purchase so it doesn’t add up. This way I’m sure I’m only spending money that I actually have in my bank account.

Paying off every purchase right away can be a chore, though. I was extremely diligent in my payoff strategies, logging onto my credit card account each night after I had a made a purchase. But there is an easier, less stressful way.

Enter Debx

Debx is this nifty new app that pays off your purchases as you make them. It sounds simple, but this simple service provides so many complex benefits, and it does it for free.

Some of the benefits include:

  • You won’t have a massive bill at the end of your billing period as each expense will be paid off as you make it.
  • Because Debx is linked to both your credit accounts and your checking account, it won’t pull money you don’t have. This saves you from automating and potentially incurring overdraft fees. My financial institution charges $35/pop!
  • Because Debx pays off your purchases everyday, your credit utilization ratio will remain low throughout the month. MyFICO cites credit utilization as one of the main factors in determining your credit score.
  • If you’re worried about debt like I was, you can do the math about your purchases as if you were spending from  your checking account. You swipe your credit card, but at the end of the day the money will be coming out of checking. This helps keep your spending responsible and allows you to reap the benefits of rewards points.

Pretty nifty, right?

But, wait. There’s more…

Debx comes with a ton of other benefits, too. For example, because they keep track of all of your credit card balances, you can view them all in one place rather than logging into each individual app for each credit card issuer.

The app also helps you:

  • Access other credit card benefits, like built-in rental car insurance, free checked bags with certain airlines and purchase protection on certain products.
  • Build credit responsibly since you’ll be paying it off as you go and keeping your credit utilization rate low.
  • Keep track of due dates.
  • Know how much you have available to spend based on your scheduled payments.

Pretty soon, they’re also going to have a feature where you can review all of your rewards in one place within the app, too.

Privacy

You know I read the Terms and Conditions and Privacy Policy before I decided this app was a good idea. Any time you decide to open up an account with a financial app, reviewing these policies is mandatory, in my opinion.

Debx’s policy is pretty good for the consumer. Your information is never sold or shared with third parties, unless they need to share info with that third party to provide you with services. For example, if you have a card with Capital One, they’re going to need to provide Capital One with your login information in order to keep track of and payoff your purchases.

The other time they’ll share information is if you’ve broken the law. If law enforcement asks for your data, they’re legally required to provide it. They’ll also have to share the info if they’re acquired or go through a merger. But both of those situations are standard across every privacy policy I’ve ever read for a financial app.

At some point, they may email you ads from some of their third-party partners. But just like with Credit Sesame–who sends out affiliate emails in order to provide their service for free–you can unsubscribe from emails that aren’t necessary to the functioning of your Debx account.

Customer Service

Getting in touch with customer service with some of these apps can be a major pain, but Debx makes it super easy. You can use their Live Chat service, shoot them an email or even call the founder of the company on his cell. Legit.

Here’s how  you can do all of those things.

It’s free. And they’re giving away money.

Debx is 100% free, so you get all these benefits without paying a cent.

On top of that, they’re currently giving away $5,000!

In celebration of their launch, they’re awarding twelve people who sign up for the wait list with cash to apply towards their credit card debt:

  • GRAND PRIZE. $3,000 to one (1) winner.
  • FIRST PRIZE. $1,000 to one (1) winner.
  • SECOND PRIZE. $100 to ten (10) winners.

Hurry, though, because this sweepstakes is only open through tomorrow!!!

See the world. Build your credit. Be financially responsible.

A good credit score is instrumental in purchasing your first home, getting a car note at an affordable rate, and sometimes even getting an apartment or landing a job. By paying off your balances daily with Debx, you’re keeping your credit utilization low while avoiding any late payments.

This system may allow you to earn enough rewards points to see more of this beautiful world like I have–and to do so while being fiscally responsible.