How to Prepare for Inevitable Medical Expenses
Not everyone gets over their head in debt because they are spendthrifts who just have to have the latest fashions or want the most advanced electronics. Layoffs, divorce, and unexpected household repairs can all cause financial hardship that sets off a snowball effect that gets worse and worse over time.
Personal injury or illness is another major cause of financial strain. Medical costs can quickly climb to the tens of thousands when you suffer from a serious illness or injury. That kind of injury usually means loss of work which further compounds the financial strain. Vicki’s credit story is a good example of how an unexpected illness can cause serious financial burden that causes devastating consequences for years to come.
With a little planning, you may be able to prevent that kind of financial catastrophe. Here are a few things you can do to prepare for unexpected medical expenses:
Buy the Best Medical Insurance You Can Afford
With the introduction of the Affordable Care Act, you can now get government help to buy health insurance, depending on your income. Compare all the options available on the market or through your employer (if applicable) to find the very best health insurance plan you can afford.
Don’t be tempted to save a little on the monthly premium by getting a higher deductible plan. Those plans typically do not offer as much coverage, so you won’t just be paying more out of pocket for the deductible, you’ll also be paying more for treatments that are not covered.
While you may think you’ll be fine because you are young and healthy, you never know when you might become injured or discover a serious illness. Don’t take a gamble that could cost you hundreds of thousands of dollars.
Contribute to an HSA
A health savings account allows you to contribute pre-tax earnings for use later on health expenses. The money comes directly from your paycheck before taxes are deducted, so you end up saving money by reducing your tax burden. That money is then available to spend on medical care, including prescription medication.
There are limits on what you can contribute to the HSA, so talk with your plan administrator to understand how to maximize your savings (and the benefits).
The best way to maximize your money is to invest it. You can start with a simple, interest-bearing savings account. By putting money away, not only will you have a little saved up in case of emergency, but you will also be growing your money in the process.
Work with a financial adviser to identify other low-risk investment opportunities, such as mutual funds and bonds. If you have a medical emergency, you can draw on these accounts to pay your expenses.
Don’t be blindsided by an illness or injury and lose everything you have worked so hard to attain. Take these and other steps to prepare your finances for even the worst emergencies. You may still struggle, but the blow won’t be as hard as if you had done no planning at all.
Photo courtesy: DarkoStojanovic
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