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HSA Is The Best Investment For Financial Independence Retire Early - The FIRE Movement - YouTube
Channel: Jarrad Morrow
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whoo I'm excited for this topic it's
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time for another tool to help you reach
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financial independence and financial
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freedom faster I already showed you the
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strategy on how to get free cars for
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financial independence so now we're
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adding to that list of tools that you
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can use hundreds of thousands of dollars
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is where you could be leaving on the
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table if you are contributing to an HSA
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every year even if you are you could
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still be leaving more than 300,000
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dollars on the table if you aren't using
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it properly now I don't want this to
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happen to you so let's dive into this
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topic to make sure you've got yourself
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set up to really maximize a health
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savings account listen up even if you
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aren't pursuing financial independence
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you still need to consider investing in
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an HSA like it's a retirement account
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for you because the benefits are
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absolutely insane which I'll cover in
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this video so do not miss it even if you
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are not contributing to one right now
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then you'll better understand it once
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we're finished in this video I'm gonna
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give you a crash course on an HSA also
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known as a health savings account if you
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don't understand the details of an HSA
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then it can be a little bit intimidating
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so I want to help you break down those
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barriers and those walls so you can see
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what's so good about an HSA we're gonna
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cover things like the what when where
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and how I'll show you what you need to
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be doing so that you can turn a yearly
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thirty five hundred dollar contribution
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into over three hundred thousand dollars
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if you're single and over six hundred
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thousand dollars if you have a family
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I'll also log into my personal HSA to
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show you the system and process that I
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have set up to ensure a 100% success
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rate if you have any questions or need a
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little bit more clarification throughout
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the video then please let me know down
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in the comments I'll answer every single
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question or do my best to help you find
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the answer that you're looking for like
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I said I know that nature say can seem
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really intimidating at first but the
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only way that we reduce intimidation is
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by educating ourselves just a little bit
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more which I'm gonna help you out with
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that exact thing in this video hey I'm
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Jared with an A and on this channel we
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like to talk about all things personal
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finance and investing an HSA is
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basically a savings or investment
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account that you can contribute pre-tax
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money to every single year now single
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people can contribute up to thirty five
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hundred dollars per year and families
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can contribute up to
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$7,000 per year once money is put into
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this account the only way to withdraw it
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is by spending money on medical expenses
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on the surface this sounds dumb and not
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worth your time at all at least that's
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what I used to think let me get this
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straight your money is basically locked
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up with the annoying restriction of only
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being able to access it through going to
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the doctor spending money on medication
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getting injured or other medical related
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expenses like that yes that's correct
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but what if you looked at and used your
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HSA like another form of investment
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account think 401k IRA 403 B and so on
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the best part is this would be a
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tax-free investment account I'll give
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you the strategy to make this happen in
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just a minute
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think of an HSA like a way to hedge your
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bets when it comes to medical costs when
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you get older it's a way for you to kind
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of earmark less of your retirement money
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that's in will say a 401k IRA or 403 B
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towards medical expenses if you haven't
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done it yet please Hulk smash that
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thumbs up button the way you use your
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health savings account like an
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investment is by actually investing the
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money that you contribute into it it's
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kind of confusing because the name has
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savings account in it but once you
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deposit the money into the account
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you'll have the option to either invest
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that money or just let it sit there the
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HSA that I have allows me to invest all
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but one thousand dollars of the money in
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my account to be honest with you I'm not
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sure if all HSA czar like this but
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that's just how mine is set up so I got
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to deal with it I'm assuming they do
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this just to make sure that you have a
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little bit of non invested cash just in
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case you needed it in the grand scheme
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of things $1,000 isn't very much and I
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kind of appreciate the fact that they're
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giving me this little restriction I'll
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show you my investments in just a few
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minutes there's actually a triple tax
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savings with an HSA yes you heard me
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right you save on your taxes three
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freaking times the first way the money
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you contribute to an HSA is pre-tax
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money from your paycheck so you skip out
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on paying the taxes right there the
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second way the gains from your
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investment growth dividend payouts and
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interest accumulated is not taxed at all
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so you skip on paying taxes right there
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as well and the third way when you
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withdraw the money for medical expenses
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you do not pay any taxes on that
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distribution so you don't pay any taxes
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on what you
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put in and you'll pay any taxes on any
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of the games within the account it's
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kind of like saying sorry not sorry
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government but I'm not paying taxes on
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these either the way that you're gonna
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turn this into an additional retirement
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account is by not pulling money out from
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your HSA when you have any medical
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expenses this means that you'll pay for
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all medical costs out of pocket and save
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the receipts that you can cash those
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suckers in many years down the road the
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reason you'll do this is because you'll
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want the money in your HSA to be
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invested for as long as possible so that
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it can grow if you put $3500 into it
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this year and pulled out that $3500 in
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the same year to pay for medical
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expenses then you'd only have thirty
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five hundred dollars to spend but and
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this is a big but if you left the thirty
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five hundred dollars invested pay for
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the medical expenses out-of-pocket save
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the receipts assumed a seven percent
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return and withdrew that money in 20
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years then that thirty five hundred
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dollars would turn into over thirteen
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thousand five hundred dollars of
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tax-free money and that's just after 20
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years let's get a little more wild and
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crazy if you waited thirty years then
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that thirty five hundred dollars would
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turn into over twenty six thousand five
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hundred dollars of tax-free money and
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this is just from contributing to an HSA
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for one year if you were a single person
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keep in mind this example is for a
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single person if you are a family then
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you can contribute up to seven thousand
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dollars per year and you would have
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double that amount I've got a bonus tip
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for you so listen up now if you want to
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maximize your return even more then
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you'll want to do this we're gonna game
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the system a little bit since you're
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gonna leave the money in your HSA so
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that it can grow you're going to need to
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pay for medical expenses out of your
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pocket but you're smart and responsible
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so instead of paying for those out of
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pocket pocket expenses with cash or a
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boring debit card you pay for them all
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with a good rewards credit card that you
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pay off before the end of every month
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mind-blown think about this not only are
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you making money by keeping your HSA
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money invested but you are also getting
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will say 2% cashback on that purchase if
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that's the type of rewards card that you
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use if you want to know the best cash
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back rewards credit card to get I made a
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video on that I will throw a link in the
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description to that video or I also
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tell you which cash back rewards credit
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card I personally use to open and
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contribute to an HSA you need to be at
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least 18 years old and covered under a
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qualified high deductible health plan
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sometimes referred to as an hdhp now
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these high deductible health plans are
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usually always off they're offered so it
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shouldn't be an issue there's two ways
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to start investing in an HSA that you
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need to know about the first way is
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through your current employer as long as
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you've chosen a high deductible health
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plan then you're good to go
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your employer would usually call this
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plan out as HSA eligible but if you are
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not sure then by all means check with
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your HR department sometimes employers
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will even offer to contribute some money
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to your HSA as well in the case of the
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company that I work for they contribute
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$500 per year towards my HSA all I had
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to do was go get a wellness checkup and
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they credited my HSA account it was
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pretty awesome I was like I yeah I'll
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take free money any day of the week
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especially when I'm able to invest that
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money and let it grow sometimes
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employers don't offer an HSA and if
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yours doesn't don't worry because you're
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still able to open one as long as you
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were enrolled in a high deductible
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health plan then you can open up an HSA
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account on your own in this case it
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would be self-directed kind of like how
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if you want to invest in an IRA and you
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have to do it on your own the two that
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I'm more familiar with that I'd
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recommend are lively and health equity
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I'll throw links in the description to
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check both of them out if your employer
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offers an HSA then they'll choose the
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company so all you have to do is create
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an account the good thing about an HSA
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is that you have full control over it
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once you start investing in one it is
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yours you can take it with you even if
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you leave your current job
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if you switch employers then you can
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roll it over just like you would with a
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401k account with the past employer you
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can withdraw your money for non-medical
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expenses but it comes with a little bit
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of a price if you use your funds to pay
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for things other than non qualified
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medical expenses then those funds will
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be taxed as ordinary income and the IRS
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will impose a 20% penalty so if you
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spend $500 on non qualified medical
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expenses like candy at Walgreens or
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something fun like that then you'll pay
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a $100 penalty this $500 will also be
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shown as income earned for the year as
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well which you'll of course pay taxes on
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this is not cool
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don't do this because it defeats the
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whole purpose of an HSA and also don't
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try to get one over on the IRS by trying
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to use the money for non qualified
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medical expenses sure they may not catch
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you if they don't audit you but the IRS
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they really aren't the kind of people
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that you want to be messing with these
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people will eat your lunch take the rest
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of your lunch money then come back for
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more
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this is really important you need to
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keep track of your medical receipts over
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the years so you're able to actually
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take money out later down the line if
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you're not going to need to cash these
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receipts in for another twenty or thirty
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years then the odds of those receipts
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getting lost is extremely high you're
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gonna move you're hopefully going to go
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on a cleaning binge and probably
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accidentally throw those receipts out or
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life is just gonna happen and then
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randomly disappear just like your socks
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always do side question does anyone else
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have a sock monster living in their
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house like I have since I was a small
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child organization is the key if you're
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not an organized person then you need to
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get freaking organized these receipts
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are like Willy Wonka's golden tickets no
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ticket no chocolate they're as valuable
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as money since you can't take money out
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of your HSA without them here's my
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personal system to ensure that I never
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lose the receipt immediately after
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paying a medical bill or arriving home
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from the doctor's office I take a
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picture of that receipt then I upload it
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to a file storage system somewhere out
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there on the cloud now you can use
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something like Google Drive Dropbox or
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Evernote I personally use Google Drive
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and I have a specific folder set up for
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this type of thing I have one folder for
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receipts I haven't cashed in yet and
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another one for when I eventually do
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that way I'll be able to keep track of
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everything I'm a weirdo who likes to
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stay super organized and I'm gonna
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overachiever so you don't have to go
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this far but I also track my medical
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expenses in a Google spreadsheet where I
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track a lot of my other life things as
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well now you can't just submit receipts
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for everything so let's talk about the
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medical expenses that are eligible for
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reimbursement
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we've got acupuncture bandages body
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scans chiropractor contact solution
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glasses doctor's appointments surgery
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therapy wigs x-rays Guide Dogs if you
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get a guide dog you can turn the receipt
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into your HSA and get that stuff paid
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for tax free those are just a few the
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list is pretty long and the IRS will
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update it every year
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I would assume that the vast majority of
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things on this list will not change to
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give you a detailed book and everything
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on the list I'll throw a link down the
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description so you can go over it a
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little bit more for yourself since
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you'll be using or HSA as a retirement
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investment vehicle we need to have the
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very important fees talk no matter which
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company you use for your HSA you should
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be aware of if they charge you any fees
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most won't but some will charge as for
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the fees when it comes to the
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investments that you choose I personally
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go with a low cost index fund preferably
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something from Vanguard if they're
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available now it's time to get into some
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behind the scenes how the budges pact
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how the sausage is made and show you my
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HSA so here's my HSA my current employer
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uses health equity as the provider I
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like them they're perfectly fine I have
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no issue with them at this point in time
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now leading up to this year I wasn't
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contributing to an HSA for a couple of
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different reasons one of them was I was
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on some medication that I wanted to get
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off before I started contributing to an
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HSA and the other one was I didn't
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understand an HSA and how important it
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was and how much it can help your
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retirement help supplement your
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retirement and grow even more wealth for
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your future self so that's why my
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account balance isn't too high because
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this is the first year if you notice
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here I have the breakdown of my account
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balance so I've got fourteen hundred
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dollars invested and available to spend
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or do something with I've got $1,300 now
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like I said at the very beginning of the
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video I have to leave a thousand dollars
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available to spend I can never invest a
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thousand dollars that's a minimum that I
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have to keep my account but I still have
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three hundred and thirty seven dollars
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to invest but I'm gonna get to that in a
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minute and what I'm doing with that
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because it's very important now let me
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show you how I have my investments
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broken down here are the two investments
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I've got a bond and I've got a Vanguard
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growth index right here and I've got it
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it's a ninety five percent in the growth
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index and five percent in a bond these
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are the investment options that I have
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available to me
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luckily health equity has all low cost
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Vanguard index funds which makes my
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heart really happy and they're all
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passively managed which leave which
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makes the cost very low that's why it's
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a low cost type index fund they also
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have retire
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fun's in here as well going back to what
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I mentioned at the very beginning of the
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video as you can see I still have three
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hundred and thirty seven dollars
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available to invest now I just had that
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money deposited into my HSA account and
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I don't have to do anything right now
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because I have turned on automatic
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investments so this money will be
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invested first thing Monday morning if
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you have an HSA I highly recommend
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turning on auto invest because you don't
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want to have to log into your account
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and be clicking to invest every time you
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get money deposited into your account
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because time in the market is more
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important than timing the market you
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want to leave that out of your hands out
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of your brain and not even worry about
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having to click invest because it's
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automatically gonna be doing it for you
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and just to show you my investment fee
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if you will they have a monthly
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administration fee of point zero three
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three percent I can't get around this
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it's just the way that it is with health
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equity you so I kind of have to deal
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with it but luckily it's pretty low so
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it's not that big of a problem if it was
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higher than that I'd probably go to my
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HR department and be like hey look at
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this this is really expensive can we
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switch companies where can you talk to
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the company to get that feel o'er just
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to reiterate the monetary benefits again
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if you were single and max out your HSA
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for twenty years then at a seven percent
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return you'll have over a hundred and
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forty three thousand dollars after
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thirty years you'd have over three
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hundred and thirty thousand dollars if
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you were married and you max out seven
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thousand dollars per year for twenty
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years then at a seven percent return
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you'll have over two hundred and
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eighty-six thousand dollars and after
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thirty years you'll have over six
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hundred and sixty thousand dollars even
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though you might be healthy now we're
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all gonna age and see a spike in our
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medical expenses as the years go on
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that's why it's important to take
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advantage of this HSA right now it's
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gonna save you a ton of money in the
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future if you just make sure to invest
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the money in your account let me know in
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the comments below what you think of an
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HSA or if you have any more questions
[921]
check out the links in the description
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to different playlists to help you all
[924]
solve your personal finance and
[926]
investing needs I'll see in the next one
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friends a Dios quick disclaimer this
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video is for informational
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purposes only I am NOT a financial
[934]
professional please do your own research
[936]
research before investing your money
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