Real Money: 3 simple tips for year-round flex spending

If you're a longtime FSA user, you know the anxiety that comes when your deadline approaches and you still have money left to spend in your account. After all, FSAs work on a year-to-year basis, and are subject to the "use-it-or-lose-it" rule, which means that any money you don't spend by the end of your plan year is forfeited to your employer.

As much as you love your company, you shouldn't be handing them your leftover FSA funds! Even if you're in the middle of your plan year, there are still some positive steps you can take now and in the future to avoid lost funds or a year-end scramble.

1. Stop paying out-of-pocket!

The central benefit of an FSA is reducing how much you pay in taxes annually by slightly reducing your take home pay and funding your account. But to reap the maximum tax savings from your FSA, it's essential to use these funds to shop instead of using the cash in your pocket.

After all, the money in your wallet has already been taxed, but your FSA funds haven't. So, if you have a chance to make a purchase with your FSA funds, take it! Check out our Eligibility List for more information about what your account can cover.

2. Do you have the grace period or rollover?

This is a big question that can affect your yearly FSA spending habits! Employers have the option of offering one (or neither) of two options of "use-it-or-lose-it" relief: the FSA grace period or $500 rollover.

The FSA grace period gives users 2.5 months to spend the remainder of their FSA funds after their plan year deadline, while the $500 rollover allows you to move up to $500 into next year. If you don't know the answer, go to HR immediately to find out what end-of-year options you have with your FSA.

(If you're not sure which one you have, don't worry, you're not alone. This article can offer some simple guidance, and of course, if you still have questions, contact your plan administrator.)

3. Calculate constantly!

It's never too early to plan ahead, so use this plan year as your guide for how much you should set aside in your FSA next year. Add up your expenses for over-the-counter products, co-payments, specialist visits, prescriptions and more to get a ballpark figure you can use to calculate your FSA allocation for the coming year.

Keep in mind how your FSA use changes throughout the year. Do you do most of your spending in the winter? Maybe allergy season eats up most of your funds? Are you always rushing to spend those last remaining dollars by the year-end deadline? Taking note of your year-to-year spending habits can make it easier for you to budget the next time around.

Our (completely biased, but definitely great) recommendation: The FSA Calculator is a handy tool that can help you add up your expenses in one convenient place.

Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

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