Debt Free

To get debt free and stay there you have empower all three legs of the financial triangle. If you aren't going to be making any more money in the near future, you better find some new ways to save some, somewhere. Here are a few ways that can add up to big money, depending on your financial situation.

1 - Health Care Savings – Nothing can blindside you like health care costs. Having just contributed aver $3,000 (after insurance) to our local Children's Hospital, I can vouch for the fact that medical costs are heading for the roof like a meth-head during a bust. Many employers are reducing or eliminating health coverage for employees. Others are finding creative ways to economize, almost always at the expense of coverage. It's not really their fault in many cases. Your employer has to make a profit, or you'll have no job at all.

Given that your health insurance deductible may have increased, you should take stock of your family's health. If it looks like you have a better than even chance of ending up in need of some medical care in the not too distant future, you should consider a health savings plan. If you are covered under a qualifying High Deductible Health Plan (HDHP), you can open a tax preferred health savings account at your bank or credit union. In order to qualify as a HDHP, the plan must meet the following qualifications, as set forth by the beloved Internal Revenue Service:

1 -Deductible >/= $1,050 for individuals or $2,100 for families

2 - Annual out-of-pocket expenses < $5,250 for an individual or $10,500 for a family, including the deductible and co-payments (but not premiums).

You can possible get a HDHP through work, or you can get a private plan. For 2007, the maximum you can contribute to your health savings plan, under the IRS guidelines are: Individuals - $2,850 and Families - $5,650. Furthermore, the IRS will now allow you to make the maximum contribution to your HSA no matter when during the year you put your HDHP into effect. New this year, the IRS will allow a one-time IRA rollover into an HSA.

If you are young, and in comparatively good health, it may make more sense to take the same approach advocated by many experts for auto insurance; keep the deductible high to cut annual expenses. The bonus with health insurance is that you can have the HSA as a backup to avoid having to pull money from your traditional savings, or worse, taking a giant tax hit by liquidating a portion of your IRA.

2 – Cut Your Taxes – Sure, you want to pay as little tax as legally possible. Some of you out there want to pay even less than that. Here's a little hint that can save you a few bucks on major purchases. If you live in an area with sales taxes, know that they often vary considerably between municipalities. If, for example, you're purchasing a car, boat, or other motor vehicle, just a few tenths of a percent can add up to a nice IRA contribution, or, if you've already maxed out this year, dinner with the missus. Say you're buying a $25,000 car, sadly not much of an extravagance these days.

If the sales tax in your town is 8.5%, but in a city 20 miles away it's 8.1%. The sales tax you'd pay if you buy the car at the dealer around the corner is $2,125. Hop in your old car and head down the road 20 miles. Not only will you get to take in some scenery with the family, you'll only pay $2,025. You just saved $100. Maybe not much compared to the price of the car, but hey, a hundred bucks is a hundred bucks! Even accounting for the gas and mileage on your car accrued in the extra 35 or 40 miles you drove, you came out on ahead.

3 Cost Benefit Analyze Everything – Many of us do this in our heads almost every time we make a purchase. For larger purchases, it makes sense to formalize the process a little bit. Put down on paper the costs associated with the purchase and what you expect to receive from it. Don't forget the hidden costs, either. Buying as hybrid vehicle? Good, it'll help reduce our dependence on that bastard Chavez down in Venezuela. Look at all the costs associated with it, though, it may not make as much financial sense as you first thought. Think about such things as the costs of replacing and recycling the battery pack in addition to the added cost of the vehicle over it's traditionally powered brethren. What price will fuel have to be, and what will your annual mileage have to be to make it pay off in a purely financial sense?

Even if a purchase doesn't pay off in a purely financial sense, You may have other reasons for making it. In the case of the hybrid vehicle, it may be worth it to you to cut your emissions and help the nation wean itself off foreign oil. There too, you'll have hidden costs. How ecologically costly is it to manufacture and dispose of the Ni-MH or LI battery pack that helps give you that spectacular mileage? That's the subject for another post and minds more scientifically inclined than mine.

Another example would be in your diet. Sure, 23% fat hamburger is cheap, but what does that saturated fat do to your arterial system? What hidden health costs are incurred by the consumption of excessively fatty foods? Are you saving money now at the expense of massive medical bills later? Better revisit that HSA idea.

If you're out to get debt free, you may be almost there, or you may need all the help you can get. Hopefully these money saving tips can be another group of broad heads in your quiver.

As for me, I'm celebrating paying off my last really high interest (24%, shows what one late payment and an over the limit charge can do for you!) credit card. The last $854 was paid in full this week, and that thing is out of my life for good. (and no, I didn't just move the balance to another credit card) Citi can have it back, thank you!