Is it better to pay an insurance deductible, or get an upgrade?
"You asked for simple, and I promise you this is... it just looks a bit math-heavy to start with because we have to handle a couple of different scenarios. Bear with me :) I find the best way to deal with these kinds of questions is to put together a ""Total cost"" for each option, for a sensible amount of time, and see what the difference is. We'll include the current cost for both options, plus the subsequent costs for 12 months: I find that more useful than a straight ""which is more expensive right now"" because it includes the potential costs of the next upgrade, and any changes to the plan. Let's throw some numbers together for the next 12 months (if your current plan is longer than 12 months, read the note at the bottom first) First, write down the cost of these things **The above assume that you have two options if you take the repair option (and only one option if you use the buy-out option). The two options we're assuming here are that you can either:  If you'd choose the same new plan regardless of whether you take the $100 or $150 option, there's no need to include both options: to simplify things you can just use the same numbers for both b/c and Pu/Py and the calculation below will still work. When you've found and written down the above, just do the sums below to find your two total costs over 12 months. Nothing fancy, just plug the numbers above into the equation. eg if Pe (eBay value of the phone) is $80, replace Pe with 80. Don't forget to do the parts in brackets first! That's your total cost for both options for the next year. Note: I'm assuming that your plan ends within the next 12 months. If not, just replace 12 in the above calculations with another term! You can also do this if you want to find out the price difference over a longer period (noting that if you upgrade to the same plan regardless of choice, you'll get the same answer for any period longer than your current contract)" If you repair your phone, when your current balance is paid off, could you get the same coverage for less money? Or would your monthly payment remain the same regardless? That would be the easiest comparison to make.  ie: Pay an extra $49 to have the phone replaced [ie: the cost of using the insurance program for $149, vs the cost of buying out your plan for $100], get a slightly worse phone instead of upgrading, but save $15 / month for the next 2 years. This would pay off economically within 3-4 months, but the phone would be older (not sure if you care about that). I would go for the upgrade and cancel the insurance. It's been 5 years since I left the post paid subsidized phone world and I'm WAY better off.  I use ATT GoPhone and I buy my phones in cash.  If I shatter my phone, I replace the screen or simply buy a new one.  Sites like swappa.com make buying and selling phones a breeze and you save a bundle of money leaving the carrier subsidies and ridiculous insurance programs on the table. "I think you have a few choices that cannot be described by math alone: Repair current phone:  149 Replace current phone with new model from carrier:  100 + cost of new phone Replace current phone with new model on payment plan from carrier:  100 + cost of new phone + finance charge (could be zero or cleverly hidden). You can also replace the current phone with either a used or new bought from a separate party.  Quite recently I was selling some gently used IPhones 4S for around $140.   So really you have to determine what is most important to you guys.  Is it important to have the newest model phone with laying out the least amount of cash now?  Then by all means go with the payment plan with your current carrier. Is it most important to be financially efficient, while having a good working phone?  Then pay the deductible; or buy something gently used.   In my opinion, having a phone payment is a losing game, akin to buying a new car every three years or so.  You are buying something on time that quickly depreciates and hiding the true cost of the item in ""painless"" monthly payments." I'm going to guess you're on Verizon and your wife has an iPhone. I just went through this exact same situation with my mom's phone last week. When you're off contract with Verizon you're saving $25/month on your plan (at least, I am), so staying off contract is big. If you do the monthly payment you're paying full retail over 2 years, without interest, so you do stay off contract at least. Here's the thing, as long as it's a 16GB iPhone 5 or better, you're going to be able to Craigslist it for the cost of the deductible, no problems. To me that makes the decision pretty easy to make. As long as you can Craigslist it for more than the deductible, get the insurance replacement. Then when you want a new phone you can sell your old one. Since you can sell the phone, I think that makes the comparison between the deductible and deciding to pay off the $100 now and start payments on the new phone less relevant. The real comparison I'd suggest looking at is the value of the phone and the deductible.
"Basically, the money you pay in student loan interest is tax deductible, which means as far as the IRS is concerned, you didn't make that money. However, what that saves you on your taxes is a percentage of a percentage; you save the amount of your current marginal rate on the money you paid as interest. Simple example with made-up numbers: Let's say you had a student loan outstanding, and you were making payments of $150 monthly on it. Total payments to said loan in one tax year would be $1800. Of that amount, let's for the sake of argument say that half, $900, was interest. You get your 1098-E with that number on it, and reduce your taxable income by that amount. You're currently doing well, not outstanding but OK, so you're in the 25% tax bracket that most single middle-classers are in. So, your reduction in taxable income of $900 saves you the 25% that those 900 simoleons would have been taxed at, which is $225. So, all told, this loan is a net drain on your disposable income of $1,575, of which $675 is pure cost of capital; you never received a dollar in disbursements to match this amount you're paying, so it's money lost now in return for previous gains. 10 years later, you pay off the debt. Now that $1800 is yours to keep, and to pay full  taxes on. You pay $225 more in taxes (actually, because of amortization, the amount of additional taxes has been steadily increasing as the interest portion of the loan payments has reduced) but have the remaining $1575 in your pocket to do something else. While there is good debt and bad debt, debt is debt; whether deductible or not, the IRS will never credit your tax bill in the amount of interest owed (AFAIK; if someone knows of a loan whose interest is a credit instead of a deduction I'm all ears). So, the deduction on this loan reduces your cost of capital to an effective APR of 4.5%, and because it's a student loan and not a mortgage, you don't have to itemize so this is in effect a ""free"" deduction (even with an FHA mortgage allowing me to deduct interest, property taxes and PMI, and the residual medical costs after insurance of having our new baby, the $11,900 standard deduction for my wife and I was still the better deal this year). But, you're still losing 4.5% per year to interest. That's your break-even; if the money you could use to pay your debt could earn a better return than 4.5%, then invest it, but if not, pay off the loan. Right now, investments that could make you 4.5% are at the bottom edge of a steep increase in risk and variance, so if your expected ROI is close, I'd lean toward paying off the debt." There are several factors here. Firstly, there's opportunity cost, i.e. what you would get with the money elsewhere. If you have higher interest opportunities (investing, paying down debt) elsewhere, you could be paying that down instead. There's also domino effects: by reducing your liquid savings to or below the minimum, you can't move any of it into tax advantaged retirement accounts earning higher interest. Then there's the insurance costs. You are required to buy extra insurance to protect your lender. You should factor in the extra insurance you would buy vs the insurance required. Given that you can buy the car yourself, catastrophic insurance may not be necessary, or you may prefer a higher deductible than your lender will allow. If you're not sufficiently capitalized, you may need gap insurance to cover when your car depreciates faster than your loan is paid down. A 30 percent payment should be enough to not need it though. Finally, there's some value in having options. If you have the loan and the cash, you can likely pay it off without penalty. But it will be harder to get the loan if you don't finance it. Maybe you can take out a loan against the car later, but I haven't looked into the fees that might incur.  If it's any help, I'm in the last stretch of a 3 year car loan. At the time paying in cash wasn't an option, and having done it I recognize that it's more complicated than it seems. Generally, the HSA is self-reported.  The bank/financial provider will allow you to withdraw/spend whatever you want from your HSA.  They report to the IRS the total that you withdrew for the year (your gross distributions) on a 1099-SA form.  At tax time, you use a form 8889 to report this number of your gross distributions, and how much of it was used for medical expenses.  Ideally, all of it was used for medical expenses.  If it was not all for medical expenses, there will be extra taxes/penalties due.   Different HSAs work differently, but for mine, which is held at a credit union, I can get money out several ways.  I have an HSA checkbook and an HSA debit card that I can use anywhere.  I can also transfer money out of my HSA into my regular checking account to reimburse myself for an expense, or even stop in at the teller window and take out cash.  The credit union doesn't need to see any receipts for any of this.  They don't care if I'm spending it at the doctor's office or the casino.  It is up to me to make sure I'm spending the money in accordance to the law and that everything is reported correctly on my tax return. Nothing is verified unless you get audited.  You definitely should keep documentation on the expenses, because if you are audited, you need to be prepared to account for every withdrawal.  Make sure you are very familiar with the rules on eligible medical expenses, so you know what is allowed and what is not.  IRS Publication 502 has all the details on what is allowed. As far as how it gets counted towards your deductible, you need to make sure that all of your medical bills get sent to your health insurance, even if you will eventually have to pay for it.  For example, let's say you go to the doctor, and the bill is $150.  Even if you know that the deductible is not met yet and you will be responsible for the entire $150, make sure the doctor's office submits the bill to your insurance.  The insurance company will inform the doctor's office that you are responsible for all of it, but they will apply the amount towards your deductible. "IRA is a tax-deferred account. I.e.: you're not paying any taxes on the income within the account (as long as you don't withdraw it) and you can deduct the investment (with certain limitation on how much, depending on your total AGI). It is taxed when you withdraw it - at ordinary rates for the ""traditional"" IRA and with 0% rate for ROTH, as long as the withdrawal is qualified (if not qualified - you pay ordinary rate tax for ROTH and additional 10% tax for both on the taxable amounts). The details are a bit complicated (there's deductible IRA, non-deductible IRA, roll-overs, etc etc), but that's the basic. Regular investment accounts are taxed currently on any income, but you get the ""better"" capital gains rates on many things. So which one is better depends how long your investment is going to be, what is your tax situation now, and what you anticipate it to be later when you retire." "I had an HSA for two or three years. I found very routinely that my insurance company had negotiated rates with in-network providers. So as I never hit the deductible, I always had to pay 100% of the negotiated rate, but it was still much less than the providers general rate. Sometimes dramatically so. Like I had some blood and urine tests done and the general rate was $450 but the negotiated rate was only $40. I had laser eye surgery and the general rate was something like $1500 but the negotiated rate was more like $500. Et cetera. Other times it was the same or trivially different, like routine office visits it made no difference. I found that I could call the insurance company and ask for the negotiated rate and they would tell me. When I asked the doctor or the hospital, they either couldn't tell me or they wouldn't. It's possible that the doctor's office doesn't really know what rates they've agreed to, they might have just signed some contract with the insurance company that says, yes, we'll accept whatever you give us. But either way, I had to go to the insurance company to find out. You'd think they'd just publish the list on a web site or something. After all, it's to the insurance company's advantage if you go to the cheapest provider. With a ""regular"" non-HSA plan, they're share of the total is less. Even with an HSA plan if you go to a cheaper provider you are less likely to hit the deductible. Yes, medical care in the U.S. is rather bizarre in that providers routinely expect you to commit to paying for their services before they will tell you the price. Can you imagine any other industry working this way? Can you imagine buying a car and the dealer saying, ""I have no idea what this car costs. If you like it, great, take it and drive it home, and in a few weeks we'll send you a bill. And of course whatever amount we put on that bill you are legally obligated to pay, but we refuse to tell you what that amount will be."" The American Medical Association used to have a policy that they considered it ""unethical"" for doctors to tell patients the price of treatment in advance. I don't know if they still do." On topic of Healthcare needs, I think it depend on individual.  For example, my employer's dental plan offer PPO $34 per month and DMO $12 per month. I have my favor dentist that I have been going for years. He only accept PPO. I already had most of my dental works done so I only use him for teeth clean. He charge $100 without insurance and free with insurance. I can only use my insurance for teeth clean twice a year so $34x12 = $408 vs $200. If I go with DMO, I won't get to see my doctor and since I get my teeth once a year why not just save that money and go to my favor doctor instead the DMO doctors and if I need major dental works done which isn't immediate. I can go to Taiwan for dental works that is way cheaper than U.S.  I think if you're a healthy young man/women. You should put more money toward your retirement and only keep insurance for emergency. You can do a medical tourism mentioned in 60 minutes that can be more cost effective and those doctors are U.S. trained.  For older folks, a full Health care insurance is more needed than retirement. Just my two cents. "Discussions around expected values and risk premiums are very useful, but there's another thing to consider: cash flow. Some individuals have high value assets that are vital to them, such as  transportation or housing.  The cost of replacing these assets is prohibitive to them: their cashflow means that their rate of saving is too low to accrue a fund large enough to cover the asset's loss. However, their cashflow is such that they can afford insurance. While it may be true that, over time, they would be ""better off"" saving that money in an asset replacement fund, until that fund reaches a certain level, they are unprotected. Thus, it's not just about being risk averse; there are some very pragmatic reasons why individuals with low disposable income might elect to pay for insurance when they would be financially better off without it." So far all insurances start from the perspective of the insurance taker. However, I find it much more intuitive to look from the perspective of the insurance giver: Note that the exact amount may differ, but management fees of a few dozen percent are quite realistic. Note that it is not as unreasonable as it may sound at first, some costs: And of course most insurance companies will want to keep some profit as well. If you are completely risk averse, typically it is only financial beneficial to get insurance if you have a significantly higher risk profile. Examples of this (not an expert on boats): Note that piece of mind may also be worth getting the insurance for, for instance if you frequently put others in the position to crash your boat, and don't want to create an awkward financial discussion when they do.