It's amazing that it took me this long to get on the Flex Spending bandwagon. 2008 was the first year I actually signed up.
For those of you not in the know; You get money taken out of your paycheck, before taxes, that gets deposited into an account (in my case, a Master Card they mailed me). That $$ is only for medical expenses (they also do child care and transportation, but that's different. I am specifically just talking medical here). Those funds are then to be used to pay for your medical expenses during the year, basically tax free.
Here's how I explained it to a co-worker.
In 2008, We had 10 months left of braces payments; $203.00 a month. So, I had them take out $102 every paycheck before taxes. We get paid every two weeks. 26 paydays times $102 = $2652.00 that I will have had taken out in 2008, before taxes, to pay for braces.
Had I not done the flex spending thing, that $$ would have been taxed along with the rest of my pay. Let's say I get taxed 24% (I have absolutely no clue what I get taxed. I'm picking an average my boss told me.) I would have been taxed $636.48. That's what I saved in 2008!
Now of course there are drawbacks. If you don't use it, you lose it. I had that much taken out because I knew I had to make the payments anyway to the orthodontist. In 2009 I brought it down to something like $25 a paycheck.
This will pay for my $25 co-payments for doctor's visits, it will pay for contacts, it will pay my prescription deductible, dental deductibles, AND anything medical including buying Advil, Pepto, Bandaids (even $200 worth, huh Niki?), whatever medical I need, at Target and Wal-mart.
I sound like an ad for Flex Spending, but it really was a great benefit this year for me.