Recently a friend emailed me a photo from a gas station. It showed a $100 price tag for filling up the tank on his SUV. The message said: “Holy Cow – I’ve never seen a bill like this before.”
Welcome to the new normal in transportation. Millions of consumers who are already reeling from job losses, stagnant wages, and declining home prices now have a new life challenge to add to the list: the specter of $4 per gallon gasoline. According to an Associated Press poll, a whopping four out of ten Americans are experiencing financial hardship due to rising gas prices. With the average family spending $110 or more a month on gas than they were just six months ago, it’s no wonder many people are trying to get out of this seemingly insurmountable cost.
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So what can you do to help ease the financial pain?
See if Your Employer Offers a Commuter Account
This nifty employee benefit enables you to pay for commuting-related expenses, such as public transportation costs (think: bus, subway, train, ferry, bicycle and vanpool expenses), as well as parking (either near public transportation or at work) … with pre-tax dollars.
Those last three words, “with pre-tax dollars,” contain the hidden treasure. In plain English, that phrase means you could save up to 40 percent on these qualified commuter-related costs. The reason is that, when you sign up for a Commuter Account, the money used to pay for those expenses comes right out of your paycheck before Uncle Sam takes his share, so you are not taxed on those dollars.
The Perfect Time to Save
Another neat feature of Commuter Accounts is that they are quite flexible. You can sign-up (or sign-off) on a monthly basis throughout the year. This monthly enrollment feature is in contrast to the other types of pre-tax benefits, like health care flexible spending accounts, which limit your ability to sign-up to just once a year during open enrollment period or when you experience a qualifying life event, such as the birth of a child.
In case you missed it, June 16th was “Dump the Pump” day. This was a nationwide celebration of the myriad of ways in which we can each rethink our transportation strategies. So if you are driving yourself to work each day and getting sick of the prices at the pump, this is a great time to think about switching to public transportation or take advantage of Commuter Accounts to pay for your qualified commuting expenses.
A Missed Opportunity
Shockingly, only one in five workers eligible for Commuter Accounts takes advantage of this money-saving benefit. That’s why I’ve teamed up with WageWorks to help raise awareness around this cost savings opportunity. And given that signing up for this benefit is like getting a coupon for up to 40% off qualified expenses, you’ll want to run—not walk—to your benefits office to see if you are eligible.
How Much Could You Save?
Last, but not least—let’s talk bottom line. How much could you realistically expect to save by taking advantage of these types of programs? Well, each month participants can contribute up to $230 for public transportation and $230 for parking costs—if the parking lot is near the workplace or used to get to the workplace. (To get a sense of the cost savings for your specific situation, check out this nifty online calculator). Assuming full use of these benefits is made by a participant who is in the maximum tax bracket, annual savings can be in the $1,800 to $2,200 range. Now that’s something worth “gasping” about … but this time for joy.
[This post originally appeared at ManishaThakor.com.] Want more financial love? You can follow financial literacy advocate for women, Manisha Thakor, on Twitter at @ManishaThakor, sign up to get her email updates delivered right to your inbox here, and enroll in her innovative new online personal finance course called “Money Rules.”