Family Budgeting: Save on medical and child care expenses with Flexible Spending Accounts
Creating a sensible budget is one of the hardest parts of family financial planning. Trying to spend less is difficult for those already on a tight budget; learning to spend smarter takes some time and focus, but can save you money.
Financial advisor Marsha Woelber, a Partner at Independent Investment Services, LLC/Securities Offered through LPL Financial, Member FINRA/SIPC, shares an easy trick of smart spending: the use of Flexible Spending Accounts (FSAs). Check out her guest article below. She can be reached @ marsha@iissav.com or 912-650-2852.
One easy trick of smart spending is the use of Flexible Spending Accounts (FSAs). Check with your (or your spouse’s) employer to see if this benefit is available to you.
An FSA allows an employee to set aside a portion of earnings before taxes to pay for certain medical or child care expenses. Money in a FSA avoids income tax and the 7.65% Social Security tax. If you are in the 15% tax bracket, you could avoid paying over 22% in taxes on that money, easily adding extra cash to your budget (Not sure of your tax bracket? Google “tax bracket” and see where you fit). There are two types of FSAs: Medical Expense and Dependent Care.
Medical expense FSAs cover health expenses not paid for by insurance. Each program varies, but allowable expenses include medical copayments and items such as contact lenses, birth control pills, many OTC drugs, and even band aids. Your employer sets the maximum amount of money you may set aside. You choose to have this money taken out of your paycheck (tax-free) and then use it to pay your bills.
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