Major Life Challenges Blog Series

We are taking a closer look at some of the big issues we all can face in our lifetime. Each topic will be featured as a blog series.

Can you Budget for Medical Expenses? Of course you Can!

We have all been told countless times that budgeting is one of the keys to financial success. With that in mind how can we budget for the un-expected things that pop up, such as medical expenses?

Can you Budget for Medical Expenses? Of course you Can!  

The best approach to dealing with unexpected expenses is to make them a part of your monthly budget so they don’t become debt down the road.  Medical expenses, in fact, are the No. 1 cause of personal bankruptcy in the U.S.

 

I was guilty of neglecting to include medical expenses in my budget because I didn’t feel it was necessary, after all we are young and healthy; shame on me. This mistake cost me dearly. On May 26, 2011 my son was diagnosed as a Type 1 Diabetic. This was completely unexpected and I was not prepared for the toll this would take on my finances.

 

So no matter how healthy you THINK you may be or what insurance coverage you have developing a line item in your budget for medical expenses is a must!

 

Getting started

 

The easiest way to approach this is to examine your prior year’s medical expenses. If you have no idea, take a step back and track all of your medical expenses for one year.

 

Example: Let’s say you estimate your out of pocket expenses at $2500 / year; take that number and divide by 12 and set aside roughly $210 / month. 

 

I know you are saying, “I never spend $210 / month on medical expenses.” This may be true but, let’s say you receive a $600 bill for lab work next month—where are you going to get that money?

 

If you save monthly for expenses that have not yet occurred you will be prepared if they happen. Maybe a year goes by and you haven’t touched the money at all? Good for you; you can keep it where it is and be prepared for subsequent years or take a portion of it and move it to another savings vehicle. The bottom line is you have positioned yourself to be prepared!

 

Use a calculator

 

I love calculators they provide an excellent baseline for where to start and help you think of things you would not have otherwise thought of. For example when you think of medical expenses co-pay’s, insurance deductibles, and prescriptions come to mind.

 

We overlook items not covered by our insurance, deductibles and out of network care. I happened to run across PayFlex an excellent online calculator specifically for medical expenses. Check it out and see where you stand.

 

As I began to realize the importance of tracking our family’s medical expenses I realized the mountains of paperwork I was saving, and well becoming overwhelmed. Enter Quicken’s Free Health Expense Tracker.  The tool works best when you can connect with your insurance company. (I will warn you they do not have partnerships with every provider but, they do have an extensive list.) The tool helps you to:

funnel bill paying and organize your medical expenses for tax season. It also calculates how much you should plan to pay on your own.

 

Tax Time

 

Monitoring your medical expenses serves the dual purpose of budgeting and can help you score a lower tax bill if you meet the qualifications. (Your expenses must exceed 7.5 percent of your adjusted gross income but you can include your spouse if you are married and any dependents expenses.)

 

Be sure to keep receipts and records for things like co-pays for doctor visits, prescription costs or any other expenses that your insurance provider doesn’t pick up. Don’t forget travel expenses to and from medical treatments and uninsured treatments (glasses, chiropractic care and dental expenses).

 

Medical bills can cause future financial problems and debt; while budgeting for them before they occur may seem to strain your budget, in the long run you will be glad you did. Remember life has a funny way of creeping up on you and throwing you a curve ball every now and then; being prepared puts you on step closer to financial freedom.

 

If you currently have unpaid medical bills see what you can do to get them paid off so the debt doesn’t pile up. Consider settling them with the provider or collection agency or consolidating them through a Debt Management Plan.

 

How do you budget for medical expenses?

To Read More Posts From our Blog Series; Medical Debt, Expect the Unexpected, click here. 

Suzanne Cramer

Suzanne is a certified credit counselor and a Social Media Specialist for CareOne Debt Relief Services. Suzanne writes for Divorce, Debt and Finances and Major Life Challenges. Follow Suzanne on Twitter @ADivorcedMom where she shares her insights as a single-divorced mom with tips and tricks to keep your finances in check. 

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