Being self-employed can be a double-edged sword. On one hand, you get the freedom of a flexible schedule—something that can be especially valuable to people with many demands on their time (children, I’m looking at you). But on the other, you’re responsible for things your employer would usually take care of.
Paying more for healthcare is one of them.
Sure, you may pay more than what you would have at your ex-employer, but this way, you can save some money and still be able to take care of your health care needs. Especially when you get your health savings account (HSA) involved.
Your HSA lets you save money on taxes since contributions reduce your taxable income (think about what would happen if you contributed to a 401k or Traditional IRA… not quite the same!), and any interest you earn from the account grows tax-free. Plus, as long as you use the funds for qualified medical expenses, you won’t pay taxes on those, either.
Tell Me More About This Magical HSA
A health savings account belongs to you, not your employer or anyone else. Even if you currently have one with an existing employer and leap into self-employment, your funds can keep living there. Similarly, if you plan on opening an HSA, you can qualify as long as you’re enrolled in an eligible high deductible health plan (HDHP).
What this means is you’ll probably want to look at your health plan a little bit closer to see if it qualifies — not all HDHPs qualify. If yours does, then consider opening one, even if you don’t have any anticipated medical expenses. Again, the money is yours to keep and if you plan on letting it sit there long-term, you might even want to invest your HSA funds. Why not earn more interest on your hard-earned cash?
If you are considering an HSA, make sure to shop around since different companies offer different features — for example, Starship HSA doesn’t have any hidden fees, allows you to earn up to .25% APY on deposit balances $2,000 and above, and features easy, automated investing. There’s also a shiny debit card so you can pay for qualified medical expenses right away.
Don’t Cut Corners
Before you go running to open an HSA, consider this one super-important factor: your health. You want to look at your current health care needs and whether getting an HDHP with an HSA is really the right choice for you.
That means taking the time to look at different providers or plans and comparing things like copays and other out-of-pocket costs. If you’re ready to learn more about self-employment and HSA eligibility, we’ve got you covered right here.
Save Money As a Self-Employed Professional
Now that you’re essentially relying on yourself for your income (those days of PTO are over, my friends!), you’ll want to make sure you’re well prepared to handle any expense and ensure your health is top-notch. This might mean paying a higher premium, or finding a health plan that allows you to open an HSA—but hey, let’s get those tax breaks wherever they are, am I right?
No matter what you do, make sure your decision is based on your well-being, and not just how much you can save. Your health is your wealth, after all!