Health issues and medical costs can place a huge burden on a family’s finances and can severely impact any erase debt program if not dealt with properly. Here are some simple steps to consider To Erase Debt and Budget for Medical Needs.
Everyone’s medical needs will vary depending on their specific circumstances and health. A healthy 25-year old may not see a doctor that often unless they catch an annual flu bug or virus. Someone with Type 1 Diabetes will probably see doctors a lot more often. Maybe as much as three or four times a year for checkups and blood work.
So how do you avoid using credit cards and going into debt for what is essentially smaller, routine medical treatments and appointments?
1. Budget – like any other category, you need to budget for medical emergencies. If you take certain medications every day, then you should be able to figure out what a monthly supply will cost you and you will need to budget for that expense too. Then take the cash out and put it in a medical envelope. Budget for medicine. Budget for doctor visits. Also budget a set amount of money every month for your co-pays.
2. Participate in Your Company’s Health Program – Many companies offer medical plans where they cover the majority of the expenses and you as the employee cover a smaller percentage via paycheck deductions. Do not forgo health insurance coverage if you can get it through your company. While it may account for a good portion of your income, health care is not something you want to skimp on. Plus, the money for these insurance plans are taken out of your paycheck pre-tax, so you do not get taxed on it. And ultimately, we all get sick at some time or another.
3. Participate in a Medical Flex Spending Account – This is another financial tool that many companies offer their employees. You get to designate a specific dollar amount that goes into this special account at the beginning of the year. Then you can pay for prescriptions, co-pays, and any medical expenses from this account by using a debit card or submitting the expense for reimbursement. Let’s say you want $600 placed into the account. Usually the way it works is that the full $600 is available in the account on day 1 of the new year. Then each pay period your company will deduct some money from your paycheck to cover it. So if you get paid twice a month then $25 would be deducted each pay period to cover the Flex Spending Account. (that’s $600 divided by 24 pay periods in a year).
One drawback would be that if you left the company for any reason before the end of the year, then you would have to pay for the entire Flex Spending Account at once from your last paycheck from the company. Another drawback is that the entire amount must be used up by the end of the year otherwise you will lose what is left. It does not roll over from year to year.
So by using a combination of the programs offered through your company and budgeting money on your own will help you pay for medical costs without incurring debt for routine medical care, prescriptions, and the occasional sick day. Then you can still continue to erase debt and build wealth.