Have an FSA and not a HSA? Learn about Flexible Spending Accounts (FSAs).
Health Savings Accounts (HSAs) are usually offered by your employer and used for medical expenses. They allow you to set aside funds for medical expenses before you pay taxes on the money. As long as you use the money for “qualifying” medical expenses you will never pay taxes on it. Each account comes with it’s own set of rules, so you should check with your provider for details on your plan.
An HSA is basically a savings account. The money in an HSA can be saved over multiple years to be used later.
You can track an HSA in YNAB, but first, let’s consider the simplest approach: Not tracking this in YNAB. That may be fine for you if:
If you choose to track it, how you track it depends on two things:
Are you reimbursed for expenses after the fact?
Do you draw from funds you’ve already saved?
Step 1: Create a budget account for the HSA and choose savings as the type. Any money in this account already will be available to budget.
Step 2: Create a category for medical and assign the dollars there. If you want to keep things simple you can create one category for medical.
If you feel you want more information, create a master category for medical and sub categories for the different medical expenses. (Prescriptions, Co-Pays, Glasses, etc.)
Step 3: When you spend money from the HSA, record the spending in the HSA account and categorize it to medical.
When money is added to the HSA, enter it in the HSA account and categorize it as income. Budget it to your medical categories.
TIP: When you add money to an HSA, you can categorize it directly to the medical category instead of categorizing as income. This will bypass the Available to Budget number. Be aware that if you choose to do this, the spending and income will not appear in reports.
This is how to handle things when you do NOT spend directly from the HSA, but instead are reimbursed for expenses you paid for after the fact.
Step 1: Create a category (or categories) for medical expenses.
Step 2: Budget toward these categories with your own money.
TIP: If you are in a situation where cash flow is not a problem (ex. You have a buffer or well funded rainy day categories.), or you use a credit card and know you’ll be reimbursed quickly, you could handle the reimbursements differently.
Step 3: When you are reimbursed, enter that money as income. This essentially frees up the money you had previously budgeted toward medical. You can budget these dollars wherever you want.
Not all HSAs are the same, so yours may vary slightly in how things are handled. The best approach when considering how to enter things in YNAB is to follow the path of the money. What account did the money leave from? Start there. Where did it go? Transfer there. Were you buying something? Categorize. That line of thinking will help you sort out how to enter transactions.