My employer offers me a Flexible Savings Account (FSA) and if you have the opportunity, you should take advantage of it.

What is an FSA?

The Health Care FSA allows you to set aside up to $5,000 of your income before any taxes are withheld for reimbursement of eligible health, dental, and vision expenses which are not paid by a health plan. The expenses must be incurred by you or your dependents (for federal income tax purposes). Anything you pay out of your own pocket for eligible medical care, such as deductibles, copays, eye exam fees, eye glasses/contacts costs, some over-the-counter drugs, and dental expenses such as orthodontia, are usually reimbursable expenses.

Why do I love it so much?

The FSA not only comes out of your salary pre-tax, but it is basically a way of budgeting for health expenses. Sometimes we should plan for them, such as dental appointments and regular doctor appointments. Others, however, we don’t see. In emergencies, we often have to pay out of pocket for certain expenses. I advocate setting aside a little bit of money for medical expenses so we’ll be prepared when something happens.

An FSA does the budgetting for us by taking out a little big from each paycheck and in return we get a debit card that we can use for health expenses. The best part? Instead of like my budget where I set aside money each money and after a year I have a hefty sum, the FSA gives you the money upfront and then takes money over the course of the year. So your mind is immediately put at ease and you don’t need to worry about coming up with cash should something happen.

Restrictions

When leaving an employer, the rules vary, but often times you can use the total amount designated for the FSA at the beginning of the year, while at times you may not use the remaining money in your FSA after the termination of your employment.

Hopefully most of you did not go out this morning, I think that would have been a big mistake. I have friends who go out early and buy 10 DVDs for “only” $7 each. But in the end, they spend $70 on something they don’t really need. My suggestion is to stay in and only buy things if you know what you want AND find a good deal in advance.

I’ve been waiting all week for this, and ING has finally released it’s Black Friday Sale. Definitely not a disappointment Earlier in the week, it was announced that ING Direct would offer $683 off Mortgages ($683 is the average amount Americans will spend on gifts this holiday season).

The unannounced specials were released early this morning and here they are:

• 2% APY for a 12-month Orange CD.
• $121 Account Opening Bonus when you open an Electric Orange Account! ($121 is the average amount consumers pay in overdraft fees annually.) If you’re considering it, don’t wait another day. It’s only good until 11:59pm! There are a few restrictions, but that’s a substantial account opening bonus.

Here are my favorite articles from this week:

Twenty Something Finance presents The 5 Worst Twenty Something Personal Finance Blunders. How many of these have you made? So far, I’ve been able to stay away from these mistakes, and I’m hoping I can continue to do so.

20s Money is Pursuing Complete Independence and explains what he needs to do to achieve his goals. Then he begins Taking A Hard Look At Expenses In Order To Boost Savings.

I really enjoyed Financial Samurai’s post about Being Happy With What You Have. Everything is relative, and this is an appropriate time to put things in perspective.

Josh posts on Personal Finance Playbook about why healthcare makes him groan. It’s an extremely interesting story and it really bothers me that systems are set up to work like this.

Finally, Five Cent Nickel answers a question about Making Mortgage Prepayments. I had a similar situation recently when I tried to pay off one of my student loans. Instead of applying the entire payment to the loan with the highest interest, they split it up proportionally based on the balance of the loans. I had to call up and wait a week to get this switched.

My father was gracious enough to use his Home Equity Line of Credit to pay my 6.8% student loan, and instead let me pay him for his variable HELOC loan, which currently sits at 2.4%. We decided that I would pay $100 each month toward the HELOC, and if interest rates rise, it would be beneficial for me to make higher monthly payments.

What we didn’t do well, however, is plan out the specifics of how to handle interest rate changes. We figured out how much it would be at the current rates, but didn’t have a good formula for how to make changes. I was hoping to find an easy calculator online to manage our payments and balance information, but couldn’t find anything useful. So I turned to excel. Well, to a spreadsheet in Google Docs.

Using the spreadsheet, I build a powerhouse of a loan schedule, showing how much I will owe each month at the given interest rate. When the interest rate changes, we’ll have to input it into the “Loan Information” tab, and the rest of the table will update to reflect any changes.

This exercise taught me a lot. First, it taught me a ton about excel. I love the functions, but I am now more familiar with dates and using multiple conditions. It also taught me just how much my loan is going to cost me. The interest rate is extremely low right now, and if I could lock it in, I most certainly would, but I also know that when I am ready, I will be able to make larger payments and instead of 9+ years, I may be ready to pay it off in 6 or 7. Of course it depends on the rates and whether I would be better off investing some of that money instead of paying off loans, but at a certain point, I will probably be ready to make larger monthly payments.

I think taking a step back and looking at how long you’ll be paying off your loans can put things in perspective. Credit card debt obviously has the highest cost, but when you realize that you’ll be paying for your car for the next 7 or 8 years, maybe you’ll think twice about whether it’s worth it or whether you’d rather have some of that money (plus all the interest you’ll be giving away) for other things over those years.

Here is a link so you can see the formulas behind the numbers: Student Loan Schedule.

Plese feel free to take a look, double click on the cells to view the formuals behind them. I’d be happy to explain how I got some of the numbers and how I did a few of the crazy formulas.