Friday, March 12, 2010

Frugal Fridays: Flexible Spending Accounts

It's time for the blog carnival Frugal Fridays - when we blog about the small habits and other tidbits we include in our comings and goings to save money on a regular basis.

We have a Flexible Spending Account through my husband's employer. It allows our healthcare-related expenses to be pre-tax, which ultimately saves us about 20% on what we spend on those expenses!

There are a couple of big ways that you can do FSA shopping once you secure an FSA through your employer. One is to buy FSA-elligible items, and submit receipts for those items at the end of the spending year. The other (which I use the most) is to buy FSA-elligible items with an FSA-specific credit card issued to you, and use that credit card only on FSA items to ensure that you are spending only on what qualifies.

The tricky part of an FSA is trying to determine a) what you already buy that qualifies, and b) how much you think you'll spend on that over the course of the spending year. If you don't use your FSA-set-aside dollars, you lose them! I know of a coworker who once discovered that her FSA spending year deadline was fast approaching, and so she set about finding a pricey pair of prescription glasses just to ensure that her FSA dollars wouldn't float out into the ether, utterly foregone.

As you can see, it can quickly turn into a "The Price Is Right"-style game. Ultimately, you're generally better off erring on the side of setting aside less than you'd spend than more, since FSA-set-aside money that you don't spend is forfeit.

Here are just a few examples of things that may qualify under your FSA plan (check your plan specifics to be sure!):

Over-the-counter cold and pain medications
Allergy medications
Diaper rash creams
Doctor's office visit and prescription copayments
Flu shots
Eyeglasses and contact lenses

...and much, much more! Even if you're a guru of CVS shopping, you could still stand to save 20% on whatever you do spend on FSA-elligible items, so that's more money in your pocket.

So check out the details of the FSA plans offered by your employers; once you determine your theoretical FSA-elligible pending over the course of the year, the rest (shopping for them, and sometimes saving receipts to submit at year's end) is pretty painless for all the savings you might reap.

Redemption Unlimited is for entertainment purposes only. Mel and A. are not a financial advisers and no information found on this site should be construed as financial advice.
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1 comment:

Anonymous said...

My husband is a small business owner and we just met with the company that does our payroll. A company has to be a C-Corporation to enroll in the FSA program, and my husband's business isn't a C-Corp. Bummer, because that 20% is pretty awesome!

However, anyone can do an HSA, which has similar features - pre-tax money for health care. If your company doesn't offer an FSA, look into setting up your own HSA.