Choosing the Right HSA option

Health Savings Accounts (HSAs), created on December 2003, is designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. With both of our employers offering HSA, we had to work out the math to figure out which option to go with. The details of the plan are as follows:

Employer 1
Deductible (employee/employee+1/employee +2): 1200/2400/3000
Max out of Pocket expense (90% covered after deductable): 2000/4000/5000
Employer contribution (employee/employee+1/employee +2): 700/1400/1800
Immunization and preventative exams are 100% covered

Employer 2
Deductible (employee/family): 1500/3000
Max out of Pocket expense (100% covered after deductable): 1500/3000
Employer contribution: Nil
Immunization and preventative exams are 100% covered

Maximum HSA Contribution for Year 2008: $2900 for individual, $5800 for families

We didn’t spend much on health expense, so using that as the guideline the min expense is kept at 500 and max as the maximum out of pocket expense.

Option one (going with employer 1 alone). The employer 2 does not give any money for not using their health plan, so the savings is basically the amount you save from tax and the contribution from employer 1.
Tax deductible savings = 4400 * .28 = 1232
Employer contribution = 1400
Min spending = 500
Max spending = 4000.
Total savings = 2132 or -1368

Option two (going with employer 2 alone). The employer 1 gives about 36o for a year for not using their health plan, that can be considered as employer contribution.
Tax deductible = 5800 * .28 = 1624
Employer contribution = 360
Min spending = 500
Max spending = 3000
Total savings = 1484 or -1016

Option three(going with employer 1 and employer 2)
Tax deductible = 5100 * .28 = 1428
Employer contribution = 700
Min spending = 500
Max spending = 3500
Total savings = 1628 or -1372

So looks like taking option one is better because of the employer contribution. However if we look at the max expense then option two looks better because the employer's deductible.

The price of convenience

While making the spinach dip for a party I was hosting, i realized there is always a price to pay for convenience and people don't mind paying that price without any hesitation. Take the example of dips - the ingredients for the dip are available in the same grocery store which sells ready made dips, you can make them quickly and easily and making them is way more cheaper...still people buy ready made dips.

Don't get me wrong, at times, it make sense to pay for "convenience service or things". Say, a one off buy from vending machine when you really really need it bill. So what exactly is "convenience service or things"? Things or services for which you willing to pay extra money when there exists similar alternatives at par or with negligible effort on your part.

The "convenience service or things" in my life that i can think of are

Eating out: I feel this would make it to the top of most people's list. Take outs, eating from fast food, from restaurants are definitely convenience for us. By learning quick to make recipes, we plan to cut down (if possible eliminate) "convenience eat out". However, I must add that we do sometimes go out different restaurants to taste their cooking and we plan to continue doing that on a monthly basis.

Buying groceries from the same store: We used to buy groceries from the nearest shop while there are shops within 5 minutes drive where things are cheaper and of better quality. Buying groceries from multiple shops was something i learned from my ex-roommate. My roommate who would scour about three neighboring grocery stores to buy the things because each store offers saving on some things but not all the things. Until then, I never realized how much I was paying for the convenience of buying everything from the same store.

Borrowing books/dvds from the library instead of from say blockbuster would be another. Though i must add, borrowing from library means a lot more of a wait time for dvds/book (especially for items in demand). But is there a need for watch that particular movie or read that particular book at that very moment or can it wait?

Driving to work: We are not always so sensible about our choices though. This is a big red flag for me. I could take the bus to work, the bus pass is paid for by employer, the bus stops right in front of my apt/work and the trip is only about 10 minutes. But i still prefer the convenience of my own car. I am sure we have all given into the temptation of taking the easy way out in various points in our life.

I am sure there are more convenience things/services that could be reduced or eliminated. Many people (including me) find it hard to find a way on cutting back on expenses without dampening their lifestyle. I am sure reducing the price we pay for the convenience of things will help a long way in maintaining the lifestyle at lower cost. a win win situation indeed.

Is international the new synonym for growth?

Today I received my free subscription copy of US News. The cover story is titled- "Is the Party Over?" The magazine is making a case that the growth in US stocks is over. At least the two decades of the "boom" phase...While not scientific, and by far not indicative of any sort of trend, looking at the rate of return of my mutual funds, the ones based on international markets outshone the domestic market by over 10% this past year. Further I keep hearing a growing voice to invest in international markets from financial pundits... ironic since the international market used to be considered a greater return at the cost of higher risk. Maybe being a product of the BRIC world myself, I always viewed the international market gave a better growth rate at lower risk. Good to know that the mainstream is slowly buying into that idea too.

shopping at costco

Today we went to costco, our monthly shopping ritual. Costco is one place where you can spend money thinking that you are saving !. How ironic if you ask me. The concept is real simple, when things are priced less (by increasing the quantity) people tend to buy more. That plus the placement of products ensures that the checkout lines are always full. So our costco shopping strategy is to go with a shopping list and ensure that we stick to the list. Once at costco we tend to move quickly through the first set of display items (big ticket items that can result in impluse buy). and for a family of two, our average costco bill is kept below $100. What about your strategies for shopping at wholesale stores?

Year 2008: the Year of recession

Year 2008 is the year of the Rat according to the Chinese calender. If you ask me , i would say its the year of recession. While i would be happy to be wrong, i feel this year would be the "official" start of recession, at least for the western developed world (mainly US and UK). I am more curious to know how the developed world's recession will affect the emerging world. The emerging world (essentially brazil, russia, china and india) are coming to age and this recession should tell us how much of their economy is tied to the world / US economy and how much is based on their internal growth.

The reason why US in particular will enter recession is simple - Unbridled spending coupled with unwise business decisions will result in a crash - A big one. So this year, the ongoing financial crisis will accelerate into a meltdown. The possible after effects of this recession would include

1. The value of dollar would go down, but i think still dollar would be the key currency (because there is not currency or group of currencies to take up the position of dollar)

2. The world economy would be more detached from US economy

3. The rise of the emerging markets

Fun times :)

Timing the funding of Roth IRA

Our Roth IRA money is invested in two vanguard mutual funds (one international and another large cap). Its about two years since we started roth IRA accounts with vanguard. Over this period i have noticed that the time of the year when mutual fund is funded matters. Personally, i feel funding mutual funds between December mid (after mutual fund pays the dividend) to Jan mid would be the best. The market in general seems to be down around Christmas eve (tax loss selling?) and also most mutual funds pay the dividend before christmas eve is paid. These two factors seems to lower the value of the fund during that period, allowing you to invest during the lowest point inf value to gain the best appreciation of your money.

There seems to be two pointers against this thinking
1. While timing the funding of mutual fund is not exactly timing the market, the value of the fund is closely tied to the market. So if you take a long term view (more than a decade view), the time of the year when you fund the mutual fund should not matter at all.

2. Since this is a roth IRA, dodging the mutual fund distribution cycle should not matter

Year 2008 Goals

New year is the time for resolutions and so here are my financial resolutions for the year 2008.

Stock
Continue the Employee stock purchase plan at the max allowed rate. Further, save $400 per month for investing in US and Indian stocks. My current watch list includes tata steel, INP, visa (if IPO comes out) and AMGN. I have about $4K earmarked for buying visa and about $2k ready for AMGN. So the $400/month should go into buying tata steel. Further i plan to sell about 400 MSFT once it hits $40 and park the proceeds from the sale for next year trades.

Non Tax funds
Continue contribution to 401K, Roth IRA and HSA accounts to the maximum limit. Maybe in year 2009 or maybe 2010, i need to revisit the decision to contribute to the retirement plans at maximum rate - for i might want to increase the net worth in my taxable investment accounts. I would have to cut corners here to achieve that.

Except for retirement accounts, i dont plan to buy mutual funds, this year too. Further, no plans for Ibonds either. I will starting buying Ibonds in 2009.

Expense funds
Saving up for a down payment is still the main expense fund. The estimated price range for the house is still around $425K. With 70K in hand, we need another 28K to meet down payment + $20K for misc house buying related expense. CD is the preferred way to park this money

The second major expense is saving up for purchasing a used car (that we plan to buy around end of 2009). The saving goal for car purchase fund is $6k. Also i need to sell oldest car by end of summer. CD is the only way to park this money. With $6K this year and $6k next year plus proceeds from the sale of existing car should be sufficient to buy a decent economical car/SUV

The third (and hopefully last) expense fund is for a trip. we estimate to save about $6k for that.

This year, except for the expected rent increase and the personal gym trainer the expenses should not change substantially. So the emergency fund and roll over fund should remain capped at 10+2.5K and 2K respectively.

Raiding the Emergency fund

I am in an interesting situation. What started as something done for fun, showed me how much i can save over the next couple of months. Sadly, i wont be able to meet my retirement fund goals, i.e I can not max out my roth IRA and roth 401K. In order to meet that goal, i would have to raid into my emergency fund, thereby wiping out 40% of the fund. 60% of the fund would be sufficent to meet about 3 months of my expenses. but the dilemma comes from the fact that it would take me years to get the fund to its original level. The only silver lining is that i dont predict to be in this situation next year.

A lesson i learned is that you can get overwhelmed by the opportunities to save just as you can get overwhelmed by the opportunities to spend. Lesson: Pick and choose what saving types you want, for you cant have all saving types.

Time to blog

Having a full time job that eats up most of your time plus daily chores resultsing in having so little time to blog. I wonder how other bloggers find time to blog? or maybe i am plain old lazy to blog often as i should :)

The price of ‘free’ in the rebate world

We have been waiting on a cell phone rebate from Inphonic for a whopping 8 months now. We could apply for the rebate only after 6 months of phone service and then have to wait for about 6-8 weeks for the rebate check to arrive. The latest status on the rebate website is that they unfortunately have to ‘reprocess’ the rebate.

We have to get $500 back so the amount is no joke. Somehow as the days go by I feel that my ‘free’ phones came with a big price.

1) I had to wait 6 months, fill in about 6 forms making sure I had the UPC code and all the receipts intact till then.
2) Now I have to wait till somewhere in rebate world some unknown entity approves my rebate and sends me a check.
3)I have no idea if by chance I missed something in my application or it got lost in the mail until it is much too late for changing it.

I know (am hoping) that I will eventually get my money back but this whole rebate thing is based on their hope that the customer will not be willing to go over all the hoops and hurdles to get it. I know there are companies that seem to have a faster, smarter process but it is still not an easy process;reiterating that everything comes with a price.

I agree with Mike

The act of buying AMGN

Finally purchased some AMGN shares for $67.52 two days ago. The shares of AMGN has been rallying pretty good (due to strong results). anyway lets see how it goes. This is the first purchase, hopefully a good one too ;)

5 things the World Cup taught me about Life, Love and Money

Someone once compared the world to a soccer ball as in the world is constantly being kicked around by fanatic men in short pants. This got me to thinking what this FIFA world cup has taught me

a) Passion: As always, I was taken in by the pure thrill of each game - the passion of the players, the enthusiasm of the fans. I feel the coaches who had the most passion and fire on the field had the more determined and successful team. You need to be passionate on things that matter to you.

b) Go beyond the Hype: A lot of time and effort was spent on building an image. The Brazilian team was the favorite to win this competition, but in the end they were just not ready. Beware of things that glitter, for they are often just sprayed on.

c) Too much of a good thing: I must admit I got carried away. I did not heed to any negative remarks about my favorite team, Brazil. I was blind to everything except what I wanted to believe. If I was like that about my money I would be broke by now. I think you should have passion but not too much that you are oblivious to the obvious.

d) Teamwork/Preparation/Skill and pure luck: As the games progressed, the better skilled and in shape team shone, while the ones who were not, fell off the bandwagon. It is crucial to be in shape; laziness, tardiness can be your downfall and just because you got it right once doesn’t make you safe. I feel this is so true about investing and saving; you always need to be prepared. And sometimes what makes you get ahead is - pure luck

e) Its not always fair and the world might not agree with you: Many of us have been disappointed, let down and some are still analyzing the ‘what could have been’. Whatever happens, we cannot change reality. However unfair we may think it to be and no matter how right we think we are, we cannot always get everyone to agree with us .The best sportsman isn’t one who is always the best but the one who always does his best and is brave enough to face any outcome.

To buy or not to Buy

I am have been reading about stocks for quite sometime, six months to be precise. After setting my sights for sometime, I feel its time to plunge and invest in Amgen (AMGN).

What: AMGN is a global biotechnology company that operates in one business segment: human therapeutics.

Stock Price: 66.45 PE: 21.6 Fwd_PE:18.90 52W_Low:63.75 52W_High:86.92 Beta: 0.8
Dividend: 0, Sales: 12.72B Debt/Equity: 0.41 Book Value/Share:14.75 Quick ratio: 1.3
Leverage ratio: 1.8 Price to cash flow: 16 5YR_ROA: 6.9

Analyst Ratings: 9/10 (MSN), in general buy or hold rating

Conditions Met:
Stock price near the 52 week low
Sales should be above $40 Million
StockScouter rating should be 9 or above
Institutional ownership should be above 40%
PE should be within 25
Book value should be positive
debt to Equity is less than 1
Quick ratio is 1 or higher
Leverage ratio near to 1 and less than 15 (close to industry average)
Price to cash flow is positive
5 year Return on asset (ROA) should 6 or above.
The price chart is climbing up

Conditions Not met
Insider trading – Two major executive sold shares
Debt to Equity ratio is higher than industry average
Does not pay dividends

Selling Price
If stocks falls more than 15% below purchase price
Target Price: 93

General:
The company is large and got couple of good drugs in its portfolio. In general I feel the company is confident and is not reckless. I plan to keep the stock for 2 years (will keep revising the target price)

Disclaimer: The website records the opinion of the writer at a given point in time. Site owners wish to remind that the readers are solely responsible for any action they may undertake based on the information provided in this site.

The "Tipping" Point

She said

Y'day I got back from Seattle and had reserved a shuttle to drop me from the airport to my home.They picked me up about 40 mins after I had landed so I was late late late for work.While on the shuttle I realised that I had to no cash to tip the driver and since I had already paid by cc online there was no way I could include it in the tab.He dropped me off and I thanked him and scurried off before he could give me a dirty look or something.

But the thing is I felt bad about it,that got me thinking about the whole idea of giving a tip.In India it is not expected ;though as anywhere it is appreciated and is definitely not expected to be minimum of 10-15% of the bill.I understand that most people in the service industry here make most of their money by tips and I have no reservations on tipping generously.

What I don't know is how to account for tips in my budget..Do they come under expenses?or charity?Is it tax deductible if I hand out 10 bucks for every cab ride I take?To me it appears like I am giving money away ..is it just something between me and the person who gets it or should I get the government involved .... Thoughts anyone?

HSBC increases its rate again

HSBC is what i call an aggressive bank, they work hard to give the best interest rate to their customers. They have increased their rates again (now its 5.05%). Couple of good things about HSBC are (from our experience)

1. Gives the highest interest rate (They always matches or exceeds competitor's rate within a week's time )
2. The online system works without much hassle or downtime.
3. No minimum balance or fees
4.They dont come out with deals for new customers alone. in their world every customer is equal
5. 24 hr customer serivce.

The bad side
1. Painful Fund transfer mechanism. it takes 3 days to transfer fund to or from your HSBC account
2. The design of the website could have been better. after all that is the only interface thru which you interact with HSBC online savings account. So some thought on improving the usability is required.
3. The account setup procedure is werid. First they send the account information in postal mail. then after one week username is send, then after yet another week the password comes!.

Other than that, i have no complaints. All in all, we believe opening account with HSBC has been an excellent decision.

To choose a broader fund or not?

Its said vanguard offers good index mutual funds with low expense ratios. While that is true, there are couple of things about vanguard that I don’t like. 1. for IRA (roth) you need to keep above $5K and for index fund you need to have atleast $10K in account. I invested the money equally among naesx and vhgex Its been about 3 months now and I am unhappy with the performance of naesx. Vhgex is a more broader fund and I can live with its return. The bigger question is that I hear reports that the bull run is ending. After all it started in 2003 and can not go on for ever. Assuming that the bear is coming, I think putting money in a broader fund would be a better choice. I need to do more research before I make the final call, but I sure am tending towards it.

Too many accounts?

He Said

I think me and my better half are having too many investment account with little money in them. We got 2 Roth IRA accounts, 1 Roth 401K account, 1 ESPP account and 1 normal investment account. By next year we will have 2 401K accounts, 1 HSA account and 1 more normal account. Currently we deal with Vanguard (Roths IRA) and fidelity (Roth 401K, ESPP and normal account). I am thinking on starting an account with share builder too. I am not sure whether it is the right strategy to spread our little money across all these accounts. Only vanguard account seems to have the minimum restriction. Taking heed to the advice dont put all your eggs in one basket, i think we will have to live with these many accounts. The plan for the moment is to use automatic portfolio management except for 401K and normal investment account. For 1 roth IRA i decided to focus on symbol vhgex and for the other maybe total international stock index. roth 401 k would be managed using retirement plan year 2045 fund. My HSA account would most likely be automanaged. Comments anyone?

Health Savings account

My company offers very good health insurance packages including the HSA. I have decided to enroll in the scheme starting next year (yeah, take the risk). In short, HSA concept is to combine an affordable qualified High Deductible Health Plan (HDHP) with a tax-favored health savings account (HSA). The reasons to join include

1. Company provides a contribution ($700/yr for individual)
2. i can make tax deductable contribution of $1200/yr
3. i dont have much health related problems so i think i can afford to take that risk
4. i intend to treat HSA as any other investment account and make the money grow for my retirement medical expenses (which is a long way to go)
5. I still get my free annual checkup, allowing me to check my health conditions every year and decide whether to continue with HSA or switch back to normal insurance.

I decided not to enroll my better half into my HSA account for two reasons

1. Her company provides very good medical insurance
2. i am not comfortable with the amount of risk invovled in putting both of us on HSA.

I will keep updating on how this plan works out!

Car maintenance Schedule

I have a second hand 1999 mazda protégé car which has done 85K. Here are the list of things I do to keep the car in good condition

1. I change oil every 3 months or 3,000 miles. I tend to be flexible on the date, but I don’t exceed the 3,000 mile limit
2. Once every two months or so, I check the engine coolant, power steering fluid, and washer fluid, and add if the level falls bellow full mark. I also check brake fluid, low level of brake fluid is an indicate that brake pads needs to be changed.
3. I take the car for emission inspection every year (required in Bellevue, WA)
4. I do wheel alignment only after the car blanks to the left or right once hands are taken of the steering wheel. i.e I know for sure the wheel alignment is out.
5. Air filter is changed on every 3rd or 4th oil changes (If I see that it is visibly dirty)
6. I look at the tire to see if they look properly inflated during every other gas refill.
7. The radiator coolant is changed every 20K miles or so @ jiffy lube
A shortcut is to take the car to jiffy lube for oil change, they do OK job with filling fluids and checking the tire pressure.

One of the things I didn’t do, is buy all four tires from discount store like costco or sams club. I know sams club offers free wheel balancing and wheel rotation every 15K miles. It’s a good deal.

Other recommended tips include
1. clean the radiator grill every 12,000 or so miles
2. park the car in shade. Helps to keep the paint gloss and lowers evaporation of fuel from gas tank
3. keep a jumper cable in the car, just incase you want jump startup the car
4. befriend a local car mechanic by taking the car to him for repair. This helps the mechanic to know the car and most likely he will recommend only repair that is required.


Driving Tips
1. I don’t drive the car with a/c on unless its hot. I like to drive with windows down and wind blowing into my face. This site (http://www.nsc.org/ehc/mobile/maintain.htm) says Driving without using the car's air conditioning increases fuel efficiency by 2.5 miles per gallon. But driving with windows down should reduce the fuel efficiency but who cares!!!
2. During winter with mild temperatures, Instead of using the heat, I use engine heat to warm the inside of car while driving. If the intake to set to outside air and temperature knob is turned hot, engine heat can be used to warm the inside. Some thing I found using necessity is the mother of invention principle when once in a while, my previous car blower would fail to work.
3. I accelerate slowly and use power brake (lower the gears) when ever I can.
4. I did not speed much. With mazda protégé you cant speed. But going above 60 is bad for gas mileage.

Cross country in $500

I had to do a cross country trip from Blacksburg, VA to Redmond, WA (yeah that company!). In all it took me four days (Thursday, Friday, Sunday and Monday) of driving with 12 hours for 3 days and 8 hours during the last day - 3000 miles in all. It was a pretty uneventful (Thank God for that!). Here are some pointers to cross country trip.

Preparation before the trip
The car
My car is a 80K done 1999 Mazda protégé. Before the trip, I took it to a local mechanic and have it inspected (I had state inspection due). Then opened hood and ensured that all the fluids - engine coolant, power steering fluids, brake fluids and washer fluids are full. At the stopover at my friends place, I changed oil at jiffylube (I change it every 3000 miles), where they checked the tire pressure also.

The person
I had a cold due to seasonal allergy, so went to doctor got pills for the trip. I also went to local Wal-Mart and brought a gallon of water, couple of packs of cookies, a can of peanuts and some cranberry juice. Incase I get stranded at least I got food to eat.

The trip
I planned the trip such that I take a day’s break in Fort Collins, CO. I borrowed my roommate road atlas and decided to do ~750 miles each day for 3 days and ~500 miles the last day. In all two stays in hotel (Columbus, MO and Bosie, ID) and a day at my friends place.

Expenses
11 refills of gas totaling: $266
2 logging totaling: $168
7 eating totaling: $70
In all $504 to drive across the country. Not bad!