I have been doing some research lately around investing and return on investment. Back in March I signed up for health insurance under the Affordable Care Act because my current job did not provide health insurance.
When you complete your application you are given a subsidy amount that is calculated based on your income. You can choose how much of the subsidy you want the government to pay directly for your health insurance. Thinking I was being smart I opted to not accept any of the subsidy that I am likely to receive to help pay for health insurance now. Instead, I will receive all of the subsidy that I am eligible for when I do my taxes in January 2015. I did this because my health insureance premium is $333 per month and I can use a mileage earning credit card to pay for it. The way I looked at it, I was able to make 2,997 points from my health insurance premiums. If I had take the subsidy each month then I would have to pay less up front but I would receive much fewer miles. Even with my Barclays Arrival Plus credit card which gives 2.22% back for travel credits I would receive $66.53 worth of statement credits for travel.
What I failed to consider is that the federal government does not pay interest on the money that it holds for your. If I would have invested the $333 per month into the stock market assuming an 8% long term return over the 9 month period from April to December I would have made around $100 in compounded interest. So I gave this up in return for only $66.53 in credit card rewards.
Tomorrow I am going to try to figure out how to get the subsidy paid every month so I can keep more money in the bank. Before you make any decision regarding earning miles and points you have to consider the opportunity cost. In this case I did not consider the opportunity cost of have my funds tied up for 9 months without receiving any interest.
When you complete your application you are given a subsidy amount that is calculated based on your income. You can choose how much of the subsidy you want the government to pay directly for your health insurance. Thinking I was being smart I opted to not accept any of the subsidy that I am likely to receive to help pay for health insurance now. Instead, I will receive all of the subsidy that I am eligible for when I do my taxes in January 2015. I did this because my health insureance premium is $333 per month and I can use a mileage earning credit card to pay for it. The way I looked at it, I was able to make 2,997 points from my health insurance premiums. If I had take the subsidy each month then I would have to pay less up front but I would receive much fewer miles. Even with my Barclays Arrival Plus credit card which gives 2.22% back for travel credits I would receive $66.53 worth of statement credits for travel.
What I failed to consider is that the federal government does not pay interest on the money that it holds for your. If I would have invested the $333 per month into the stock market assuming an 8% long term return over the 9 month period from April to December I would have made around $100 in compounded interest. So I gave this up in return for only $66.53 in credit card rewards.
Tomorrow I am going to try to figure out how to get the subsidy paid every month so I can keep more money in the bank. Before you make any decision regarding earning miles and points you have to consider the opportunity cost. In this case I did not consider the opportunity cost of have my funds tied up for 9 months without receiving any interest.
