I can't believe we are 60 days away from a new year. Before we know it, we will be filling our tax returns for 2021. Does that excite you or does that make you want to get in bed and pull the cobijas over your head?
You know what ALWAYS made me want to hide under blankets? ... Open enrollment season.
For about 10 years, I never paid attention to my HR meetings discussing employee benefits or health insurance options. I found it (1) tedious and (2) difficult to understand.
That all changed when I became the Chief Financial Officer of mi familia. I became obsessed with reading those HR packets to ensure we enrolled in the right health insurance and took advantage of employer benefits so we can reduce our tax-liability.
So since November 1st marks the beginning of when many people can select their health insurance plans for 2022, I am sharing some of the lessons I've learned contigo.
(1) Know how much you have to pay to meet your health insurance deductible and maximum out-of-pocket fees.
I once choose a health insurance plan because of the low monthly fee. Then when I got sick found out that before my health insurance would start chipping in to cover my medical costs I had to meet a $3,000 deductible. That happened to be during a time when I thought "el dinero se hizo para gastar" so I didn't even have the savings to cover the deductible. I ended up having to pay $3,000 to meet the deductible and an additional $3,000 in co-payments before I met the maximum out-of-pocket fees.
Dinero Tip #1: Save the amount of money you need to meet your maximum out-of-pocket fees in a high-yield savings account. If your health insurance plan will expect you to pay $5,000 towards your health costs before it covers all future medical bills, aim to save $5,000.
(2) Take advantage of a healthcare Flexible Spending Account (FSA).
Once upon a time, I had no idea that I could pay for out-of-pocket medical expenses with tax-free dollars. See whatever amount you decide to put in your FSA account will reduce your taxable income. If you decide to max-out your healthcare FSA, you could reduce your taxable income by $2,750. Someone who makes $70,000 a year and contributes $2,000 towards their FSA account, would only have to pay federal taxes on $68,000. Cool, huh?
Dinero Tip #2: Contribute at least the amount of your health insurance deductible to your healthcare FSA so you know that you already have the money necessary to activate your health insurance coverage. If you need $1,000 to meet your deductible elect to contribute $1,000 towards your healthcare FSA. Though the money will be taken out slowly from each paycheck, you should have access to the full $1,000 on January 1st.
(3) Don't let your healthcare FSA dollars go to waste!
If you decide to leave your employer don't let them keep your unused FSA dinero. Spend time buying essentials from the FSA store like sunscreen lotion, pads, ibuprofen, massage equipment, etc.
Dinero Tip #3: Charge your healthcare FSA eligible products to your credit card and then submit receipts to get a check in the mail to cover the full cost. If you purchase $300 of FSA eligible products from Amazon, using the Amazon credit card you can get 5% back in cash rewards and end up making $15 after getting reimbursed from your healthcare FSA.
Bonus Tip: Take the time to ask questions con confianza. If you don't understand a term or even a whole handout, ask someone. Part of increasing your financial literacy is understanding how you can reduce your large expenses like the cost of healthcare and taxes.
Choose to be your own Chief Financial Officer and if you need assistance, know that I'm only an e-mail away.