PART 2: BUILDING A FINANCIAL PLAN FOR LIVING WITH A CHRONIC ILLNESS
Last week I discussed the below strategies:
- Choose the best insurance plan you can afford
- Lowering cost of medications
- Ensure your medical procedure and doctor are covered by your insurance
You can read that information using below link:
A FINANCIAL PLAN FOR LIVING WITH CHRONIC ILLNESS (PART 1 OF 3)
This week I will continue with three additional strategies:
- Use an HSA or FSA for out-of-pocket medical expenses.
- Create an emergency fund.
- Stay organized and review medical bills for errors.
USE AN HEALTH SAVINGS ACCOUNT (HSA) OR FLEXIBLE SPENDING ACCOUNT (FSA) TO REDUCE YOUR TAXES
Both HSA and FSA accounts are a great way to cover qualified out-of-pocket medical costs. With either account your employer will deduct money from your check and deposit it into a savings account that you can use for medical expenses. And that money is not taxed!
FLEXIBLE SPENDING ACCOUNT (FSA)
A Flexible Spending Account, is an account you put money into that you use to pay for certain out-of-pocket health care costs (doctor visits, prescribed medications, physical therapy, dentistry work, medical test, etc.) You do NOT pay taxes on this money. You save an amount equal to the taxes you would have paid on the money you set aside.
To calculate how much to contribute into a FSA account, examine your previous years’ insurance coverage summary and determine how much out of pocket coverage you have. Most insurance companies and pharmacy accounts will provide you a year-end summary. If like me you know certain test will be repeated annually you can estimate the next year’s coverage. Example: Last year you spent $2,200 out of pocket. If you earn $60,000 per year and put $2,000 into an FSA, you will be taxed as though you only earned $58,000 saving you a few hundred dollars.
FSA funds are USE IT OR LOSE IT, and any unused money left over at the end of the year is forfeited.It is best to slightly underestimate your needs. But any money not utilized late in the year can be spent on necessary dental work or certain over the counter drugs, etc. Never just lose that money!
HEALTH SAVINGS ACCOUNT (HSA)
My wife and I recently switched to an HAS account. Do your research and fully understand the differences before making this switch. Most health insurance providers now offer HSAs. If your employer does not offer this, you can also open a separate HSA account at most financial institutions.
Each year, you decide how much to contribute to your HSA account, though you cannot exceed government-mandated maximums. In 2019, these limits are $3,500 for an individual and $7,000 for a family. If over 55, you can add up to $1,000 more. If you have an HSA through your workplace, you can set up easy automatic contributions directly from payroll.
You will receive a debit card or checks linked to your HSA balance, and you can use the funds on eligible medical expenses. This includes deductibles, co-pays and co-insurance, plus other qualified medical expenses not covered by your plan. Be aware that insurance premiums usually cannot be paid for with HSA Funds
Unlike a Flexible Spending Account, your HSA balance rolls over from year to year, so you never have to worry about losing your HAS savings.Once you’re over age 65 and enrolled in Medicare, you can no longer contribute to an HSA, but you can still use the money for out-of-pocket medical expenses. If you use the money on non-eligible expenses, you have to pay income tax on that amount (plus a penalty if you’re under 65).
HSA contributions are pre-tax/tax-deductible, the money grows tax-free and the money can come out tax-free. This means your contributions are made before your income is taxed, you do not pay taxes on the account’s growth, and if you make withdrawals for eligible expenses, you don’t pay tax on that money then, either.
EMERGENCY SAVINGS
Most Americans struggle to keep our bank accounts in the positive. Thank goodness for overdraft protection! If you do NOT have overdraft protection – GET IT! It cost significant dollars to bounce a check, both from your bank and the vendor whose check bounced.
So you probably think I am crazy when I encourage you to save ANYTHING YOU CAN, for emergencies. That little bit here and there will add up. Below I included three previous blogs written on the importance of emergency savings.
GOVERNMENT SHUTDOWN DEMONSTRATES WHY EMERGENCY SAVINGS IS NOT A WANT BUT AN ESSENTIAL NEED! –
“I know it is HARD to build up a six-month expenses, emergency savings account. Some of you will say you cannot afford to. I say you CANNOT AFFORD NOT TO!” Click below to continue reading.
EARNING MAXIMUM RETURNS ON YOUR EMERGENCY SAVINGS –
“Currently, High-Yield Savings Account can earn about two percent per year in interest. Placing $10,000, in this account can earn you and extra $200. I know you are saying is that all! What do you currently earn on your bank accounts? Take a look today? High-yield savings accounts offer a significantly higher yield versus regular savings accounts. And these High-Yield Savings accounts carry fewer maintenance fees than regular savings accounts. You can find High-Yield Savings Account at your local banks. You will most likely find better interest rates at an online bank. Some online banks let you start saving with as little as $1.00 deposit.” Click below to continue reading.
A 52 – WEEK SAVINGS PLAN SO SIMPLE EVEN I DID IT!
“As recent events have demonstrated, we all need to stash money in an emergency savings account. I recommend the 52-week challenge. You pick how much you want to and can afford to challenge yourself each week, but the amount increases weekly.” Click below to continue reading.
STAY ORGANIZED TODAY AND FOR THE FUTURE
One day (I hope not) you may have to apply for private or Social Security disability insurance. I promise you it will be an uphill fight! To prepare for that battle, while hoping you will not need this, I recommend you maintain a written log. I use Apple’s Notes App.
- All doctor visits, with date and reason for visit. Include the hospital/clinic, doctor’s name, etc
- Prior to all visits, list your health ailments and complaints and what has changed since your last visit. Read these complaints to your doctor. Majority of doctors will add this to your clinical notes. By the way, you have the right to request these notes to ensure proper documentations are being made.
- All medical test conducted and a brief summary of the results (blood test, X-rays, Pulmonary Test, Biopsy, CAT Scan, PET Scan, MRI, MRA, Urine test, EVERY BLASTED EXPENSIVE TEST.
You want your doctor to document your health changes. A note for men – Stop sitting there and trying to man-up! This is no time to be “The Rock”! COMPLIAN and tell your doctors how you feel. Now is not the time to be embarrassed. Talk to your doctors and tell the truth. If you feel like crap- say it! And equally important -make sure they are documenting your health journey.
REVIEW MEDICAL BILLS FOR ERRORS
When you’re dealing with a chronic illness, you may have tons of medical bills to keep track of. Medical bills are notorious for frequent errors, so you must review each one for errors. I keep all of my medical bills in a folder sometimes a three ring binder. Keep them in a pile if that works for you. Your binder/folder can include all of your bills, records of payments, your medication list, and any other pertinent information. If you are one of those super excel sheet people, (I an mot) create your spreadsheets to your heart’s desire. Just stay on top of the bills.
Once you have your bills organized, it will be easier to review them and spot any errors. Sometimes an insurance company may accidentally send you a bill for the same service more than once. I have found numerous errors on my medical bills.
On more than one occasion, I’ve been charged a (more expensive) specialist visit co-pay for a primary care visit. Another time, I received a bill for a co-pay I had paid in person. You may save hundreds of dollars just by reviewing your bills and questioning unusual high amounts.
CONCLUSION
Today we covered the below three topics and provided reference blogs on the need for short and long term disability insurance.
- Use an HSA or FSA for out-of-pocket medical expenses.
- Create an emergency fund.
- Stay organized and review medical bills for errors.
Next week, I will wrap up this topic by covering:
- Set up a payment plan if needed.
- Consider disability and life insurance.
- Find easy ways to save money and earn more.
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DISCLAIMER
I am a proud nerd (my beautiful wife and daughter told me so) investment and finance blogger, with University Rutgers, MBA and Harvard University, Advanced Management education.
I started my first business at ~13 years of age. I am a successful investor in equities and real estate and happy to share my personal finance and investment lessons learned with you. I am NOThowever, a licensed financial advisor. Please do not construe my suggestions on this blog, as recommendations for your personal situation. For individual finance advice please seek your own licensed CPA or financial advisors.
