Highlights of today’s show:

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• Answering  listeners’ questions on personal finance
  
• Can money in an HSA count towards your emergency fund?
  
• How to decided between going on vacation and paying down your mortgage
  
• It’s all about ratios when deciding between spending and saving
  
• How grocery shopping with credit cards can make you fat
  

One of the biggest reasons I started this podcast three years ago was to help answer listeners’ questions on money. Today we answer two questions sent in by the listening audience.

The first question is regarding Health Savings Accounts (HSA) and emergency funds. Should you count your money saved up in an HSA as part of your emergency fund? First of all I love HSA’s and have used them for over five years now. In short, HSA’s are savings accounts that you can contribute tax free money to help pay for medical expenses. The best thing about them is that you can roll over the balance you have left at the end of each year so you can build up quite a bit in the account.

While medical expenses are one of the most common expenses that you would use your emergency fund for, it’s not the only possible emergency. Job losses, repairs to homes or cars, and emergency travel are others that you might have to use your emergency fund for and there is a penalty for taking money out of an HSA to use for non-medical expenses. Therefore while I think you can count your HSA towards the 3 to 6 months worth of expenses that I recommend having in an emergency fund, I still want you to have at least 3 months worth of liquid cash in your emergency fund, to take care of the non-medical emergencies.

Below are some posts and a podcast I have done before on HSA’s:

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• Why I love my HSA
  
• Talking about HSA’s
  

The second question is how to determine when to save and when to spend. Andy has been paying extra towards his mortgage each month but wants to take a nice vacation with his wife next year. Should he take a year off from paying extra on the mortgage to save up for the vacation?

This is a great question that unfortunately I don’t have a definite answer for. Ultimately I think you need to save for the vacation. When you are debt free except the house and have your emergency fund, that is the time for you to enjoy all your hard work in getting to this point. With that said, would it be wise to take a nice vacation every year and not pay extra on your mortgage? Probably not. Likewise I don’t want you to pay extra on your mortgage and never enjoy what life has to offer either. There needs to be a balance in what you do. The best thing to do when you are in these situations is to talk it over with your spouse, if you’re married, and agree on what you will do with your extra cash for this upcoming year. Some years might be a “Vacation” year and others might be a “Mortgage” year and therefore over time you will be saving and spending in good ratios.

Finally I also highlight an article I found from MSN Money citing a study that found that people who pay with a credit or debit card for their groceries spend on average 40% more on junk food then those who pay with cash. I found this to be interesting and share why this is another example of how our financial habits impact our life, and in this case our health.

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If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast†in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.