Over the past year I feel like I’ve been making great headway on my path to get out of debt, and eventually reach financial independence. Granted, I still have a long ways to go. But I have a successful budget, an emergency fund, and a plan.
One thing I’ve noticed along the way is the frequency of “surprise money”. You know, the money that comes in unexpectedly, that isn’t part of your usual income. The money you get back from billing errors, refunds, deposits, reimbursements… The list goes on and on. Usually it’s a small amount of money, like $20. Sometimes it’s big amounts. It’s money you weren’t really expecting to get, or maybe money you knew was coming, but isn’t part of your everyday plan.
I never much thought about this money. A check would come in the mail, I’d do a happy dance, and into the checking account it would go, forever forgotten as it disappears into daily expenses. Twenty bucks here, a couple hundred there. I’d loosen the reigns, spend a bit more freely for a few days, and then everything would go back to normal. But now that I have a handle on my money, I actually have to think about this extra money. And it’s a little shocking how often I have to think about it.
I’ve had to think about “extra money” several times already this year. My tax refund doesn’t really count, since it’s technically part of my salary that is just coming in at a different time. Plus, I already had a plan for it; I’m using it towards some repairs on the house. But I really wasn’t expecting the check from the car dealership (~$130) for an “unused rebate” on the Escape I bought in 2013. I hadn’t planned that I’d already be getting a $150 reimbursement from my Flexible Spending Account for prescriptions and copays in 2014. And I’ll likely be getting some money from Aflac in the next few weeks, for wellness checks during 2013.
My regular expenses are covered already in my budget, so there was no reason to put any money there. And I’ve hit a comfortable place with my spending money, so there’s no reason to add anything extra there. I don’t need anything right now. The rebate from Ford went straight into my savings for house repairs; that’s the next big thing I’m trying to knock out, so in a few months I can possibly list the house.
But when the FSA check came in, I had to pause and think. I have great health insurance, and a $3,000 emergency fund, should anything go wrong. Most of my medical expenses are just copays; $10 here, $25 there. I usually just pay these out of my spending money. I put aside $300 a year into my FSA at work, which reimburses me for medical expenses (which is where the $150 came from).
But last year, I racked up over $3,000 in medical expenses. An ankle injury and a lot of infections, but really, there wasn’t anything seriously wrong with me. I don’t give myself that much money for spending, so there were several times I had to divert money from savings to cover the bills.
I don’t plan on having many medical expenses this year. That being said, I hate the idea of dipping into my emergency fund if I do. And, once the house is taken care of, I’m not going to have extra savings outside of my emergency fund; I plan to start putting my extra income towards getting rid of my student loan and car debt. So, for a little more peace of mind, I’ve decided to stick the FSA and Aflac money into savings, earmarked for future medical expenses.
My bank allows me to divide out my savings online, so I can specify how much money I’m saving for what reason. Technically, the FSA money is a reimbursement to my spending money, since that’s where I originally took the money from for the copays. But I don’t need more spending money right now. So, why not put that aside for future medical costs? The money from Aflac is a benefit for having routine preventative care. So, why not use this benefit to pay for future medical care as well?
In reality, it’s all just a mind game; money in the bank is money in the bank, whether I call it “emergency fund” or “medical care” or whatever. But those mind games give me peace of mind. When you’re working on saving money (or repaying debt), it’s hard to spend money, even if that was the plan when you set the money aside. Spending the money on something other than when you planned to spend it on increases that guilt even more. Last year’s medical expenses were a slight strain, because I hated diverting money away from its original purpose to pay them. The FSA and Aflac money didn’t originally have a purpose. If I end up needing it, I’ll be less stressed pulling it out of the bank, knowing that’s what it’s there for.
In the end, we’re only talking a few hundred dollars here. And as you know, I might change my mind in a few months, and redirect the money elsewhere. Life is always changing, and I believe in being flexible. But for now, I’m giving that “found” money a name, and a reason for hanging out in my savings account.
– Cindy W.