Powerful Savings Through an FSA
If you have fairly predictable expenses for day-care or medical needs, there’s a tool you can use called medical and dependent-care flexible spending accounts (FSAs) which offer opportunities at minimum, hundreds of dollars in savings a year.
What’s especially great about these is they’re tax free while you are able to save $250 for each $1,000 you spend on care. that’s not all the benefits of its though. You can also save on your Social Security taxes because you don’t have to pay that when putting away this money either.
Are there any tricks or unintended consequences here which could hurt you financially? None at all, but you do need to manage it responsibly to protect yourself.
While that sounds scary what I just said, in reality all it means is you need to put money into the FSA somewhat conservatively because when the end of the year comes you don’t get back what’s left because of the benefits you get.
This should never be a problem with daycare, and for other medical expenses, you should be able to manage that fairly well from past expenditures on a yearly basis or if there are certain medical needs you have that have fixed costs.
The point is you shouldn’t try to game the system here, because if you put too much in it’s gone. Use it responsibly and you’ll save hundreds of dollars a year, and possibly from a thousand to two thousand, depending on what you pay out.
Why this is so great is you will have to pay these expenses anyway, so it just makes sense to pay for them through an FSA so you can take advantage of this great plan.
Eventually you’ll get a reimbursement check for your taxes. The key is to put it away for savings, which is the reason you use an FSA in the first place.
As always, don’t be tempted to take your windfalls and go spend them as soon as you get the check in hand.
If you want to occasionally reward yourself that’s a real must, just do it on a limited basis and occasionally. Keep the long term strategy in mind and know that if you commit to your savings plan and are responsible with it, there will come the time when you can buy almost anything you want for cash and never feel the weight of debt or spending what you really don’t have to spend.
An FSA is one great tool you can use to reach those savings goals.
Tags: saving money, saving strategies, Savings Tips
