This year, for the first time, I set up a Flexible Spending Account for my medical expenses. I didn’t have a whole lot of time to play with, so I took a general look at my expenses from last year and just picked a number. I knew it would be low, but decided that a low number was better than way overestimating.
What I didn’t realize was just how low that number was going to be.
I’m going to be out of money in my FSA by the middle of the year. Possibly by the end of May, even.
What happened? Well, it’s not that I’ve been overly sick. Some of it is stocking up. The OTC allergy meds I take were on crazy sale,and won’t expire soon, so I bought a few boxes. I also discovered that my FSA will cover the expensive anti-aging/acne gel I use on my face. Awesome! And some of it was just poor estimating. I didn’t think about what I spend in certain areas.
But really, that’s okay. I still got the benefit of some pre-tax spending and I now have a better idea of what is and what isn’t covered. I’ve got all my receipts in a folder right now, so I’m going to be sure to continue that folder so I know what I really spend over the course of the year. In YNAB, I have been using a budget category called FSA Expenses, and I may continue using that category even after the FSA money has run out.
So, lesson learned. I’m definitely glad I tried the FSA and I was pleased at just how easy it was to use. My previous experiences with FSAs have involved debit cards for FSA expenses, whereas with this plan, they automatically reimburse doctors appointments and prescriptions (often before I get the bill from the doc), but I have to fax or mail in the paperwork for OTC stuff. I know a lot of people struggle with that, because it means paying up front and getting reimbursed, but the reimbursements are fast enough that if I put it on my credit card, I get the money deposited into my bank account before the credit card payment is due anyway.
Here’s looking forward to next year’s FSA! (Though I hear they’re getting phased out as part of the new healthcare bill. Better get my savings in while I still can!)
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.
We way underestimated, too. We did have a few unexpected expenses, but I’m amazed at how much we spend on healthcare!
I *thought* the new health care bill just reduced the maximum? I’ll have to do some research.
Jennelle, you could be right. I just remember reading it in passing in a big summary of the changes.
Little Miss Moneybags says
The new health care bill removes OTC medications from the approved list of reimbursements (starting in 2011) and creates a federal cap of $2,500 (in 2013). See more here!
It’s better to estimate low than high–if you have money left at the end of the year, you lose it. My FSA contributions have varied over the years — sometimes it would just be $250 because I only expected to need prescription coverage, and then I’d have to have a root canal or something. Last year I maxed it out to $5,000 to get Lasik. This year I think I put in $1,000 in case of more dental work–but I’ll probably use it to stock up on OTC medication since this is the last year it’ll be covered.
I’ve underestimated too, but it’s better than overestimating and losing money at the end of the year. 🙂