5 Things to Do Now to Save Money Later
These strategies may require a bit of effort but could help you stash away lots over the long-term
By Penelope Wang
As inflation continues to heat up, many consumers are scrambling to find ways to trim their budgets and save more money.
You may have already tried the simple moves, such as opting for buying cheaper brands of coffee or eating out less often.
But for bigger savings, you may need to do a little more research, make some calls, or redeploy some of your cash. Taking these steps now could pay off in major savings in future years.
To help you get started, Consumer Reports asked a few financial pros for tips. Here are five ideas that could eventually save you hundreds or even thousands of dollars.
Use Your Tax-Sheltered Healthcare Accounts
If your employer offers a flexible spending account (FSA) or health savings account (HSA), make sure you’re taking full advantage of these options.
With FSAs, you save money for medical expenses by setting it aside pretax each year; the limit is $2,850 for 2022 (PDF). That money can be used for qualified medical expenses, saving you money on taxes. (You can see how much you might save by using an online calculator, such as the one at fsastore.com.)
Be aware that traditionally, plans have a spending deadline of Dec. 31, so if you don’t use that money, you lose it. Check your plan’s rules with your employer.
HSAs, which are available to those with high-deductible health plans, let you put away money for current and future health expenses. There’s a triple tax benefit with this option: Your money goes in pretax, grows tax-free, and can be withdrawn tax-free if you spend it on qualified medical expenses.
Because there’s no requirement that you withdraw HSA money in any given year, you can keep your savings growing to cover future medical costs, perhaps in retirement, says Patrick Whalen, a certified financial planner in Los Angeles.
In 2022, the HSA contribution limits are $3,650 for individuals (PDF) and $7,300 for families. (Those 55 and older can save an additional $1,000.)
Trim Your Insurance Costs
“If you’ve had your homeowners or auto insurance policies for a while, and you haven’t comparison shopped, you may be paying more than you need to,” says Ryan Marshall, a certified financial planner in Wyckoff, N.J.
As a starting point, you can compare prices online at websites such as The Zebra or PolicyGenius. Just make sure you’re comparing similar policies.
Another way to save money may be to increase your deductible. If you can afford to pay a $500 car repair bill out of pocket, for example, it might be worthwhile to raise your deductible to $1,000.
You can find more tips on shopping for coverage in CR’s car insurance and homeowners insurance buying guides.
Stop Paying PMI
If you bought your home for less than 20 percent down, you’ve probably been paying private mortgage insurance (PMI) on your loan, typically an extra 1 percent of the purchase price. So for a $300,000 loan, you may be paying about $3,000 a year for PMI.
The good news is that soaring home prices over the last few years have resulted in a steep rise in equity for homeowners. In the first quarter of 2022, the average homeowner had gained about $64,000 in equity year over year, according to CoreLogic.
“If your equity position is now at least 20 percent of the original purchase price, you may not have to pay mortgage insurance anymore,” Marshall says.
Contact your mortgage servicing company to find out if the PMI can be removed. You may have to pay a few hundred dollars for a new appraisal, but you could save thousands per year.
Harvest Tax Losses
If you have investment assets in taxable accounts, check to see whether you have lost money on any of your investments. If you have (and that’s pretty likely, given the sharp market downturn this year), consider selling the losing asset to harvest the loss for tax purposes, Whalen says.
You can use those losses to offset capital gains and potentially $3,000 of your ordinary income. If your losses exceed your gains, any amount over $3,000 can be carried forward into future tax years.
To avoid being out of the market, you can buy back the same investment, as long as you didn’t buy any of that asset at least 30 days before the sale and you also wait 30 days after the sale before repurchasing it. That’s to avoid the IRS wash sale rule, which would disallow the loss.
Or instead of waiting, you could buy a different investment.
Earn More on Your Cash Savings
With the Federal Reserve hiking interest rates in an effort to fight inflation, financial services companies are finally paying a bit more interest on savings.
But you’ll need to do some research to find the right option for your needs. You can compare different savings rates at websites such as DepositAccounts and Bankrate.
Recently, online savings accounts were paying an average of 1.04 percent, up from just 0.45 percent a year ago, according to DepositAccounts, while one-year CDs offered an average of 1.89 percent.
More from Consumer Reports:
Top pick tires for 2016
Best used cars for $25,000 and less
7 best mattresses for couples
Consumer Reports is an independent, nonprofit organization that works side by side with consumers to create a fairer, safer, and healthier world. CR does not endorse products or services, and does not accept advertising. Copyright © 2022, Consumer Reports, Inc.
