By Gordon Chavez, Financial Advisor
Picture this: you’re in the ER, worried not just about your health but also about the bill you’re going to face afterward. Nobody plans to get sick, but unfortunately, life happens. The good news is tha you don’t have to wait for a crisis to start preparing. With a little planning today, you can protect both your health and your wallet.
Make Healthcare Part of Your Budget
Does your monthly budget include healthcare costs? If not, it’s time to rethink it. Healthcare expenses, just like rent or groceries, should be accounted for in your monthly finances. Start by familiarizing yourself with your insurance premiums, copays, and prescription costs. It’s not the most exciting thing to think about, but setting aside funds for future medical expenses is one of the smartest financial moves you can make.
Here’s how to get started
- Know your insurance: Understand your monthly premiums and what your plan covers for emergencies, like ER or urgent care visits.
- Plan for the unexpected: Set aside funds for those inevitable, surprise medical bills.
- Review past spending: Your healthcare spending history is a good guide for future budgeting.
- Prepare for life changes: Whether it’s a planned surgery or a new baby, factor them into your healthcare budget.
Building Your Safety Net
While you can plan for routine healthcare expenses, emergencies can still take you by surprise. How do you prepare for the unknown? One word: savings.
An emergency fund acts as your financial safety net. Experts recommend having 3–6 months’ worth of living expenses saved for a rainy day. This money should be reserved for genuine emergencies—things like sudden medical issues that you didn’t see coming. And while your emergency fund can earn some interest, having quick access to it is key.
You might also consider a Health Savings Account (HSA) if you qualify. HSAs allow you to save pre-tax dollars for medical expenses, and withdrawals for qualified healthcare costs can be tax-free. They can even earn interest! The downside? You can only contribute until age 65, so make the most of it while you can.
The Power of Prevention
One of the best ways to lower future healthcare costs is by staying healthy now. Regular checkups and a balanced lifestyle can go a long way toward reducing expensive treatments later in life. This point is especially important as you approach retirement.
It’s a sobering thought. Fidelity estimates that the average 65-year-old today will face $165,000 in healthcare costs during retirement. If that sounds daunting, you’re not alone. Consider this: the average retiree has about $609,230 in savings. If $165,000 of that goes toward medical costs, that’s nearly 27% of their savings—gone.
You Hold the Power
Here’s the good news: you have the power to change that number. By taking care of your health now and planning for healthcare costs in your retirement savings, you can lower that percentage and protect your financial future.
You also want to be informed about what your options are when it comes to Medicare. My friend Rubit Ramos, a Medicare Specialist with SBHIS Medicare Solutions says, “There is a lot to know when it comes to Medicare but the main thing to know is when enrollment starts. Original Medicare is Part A and B; many will be entitled to Part A for working 10+ years in the US. Part B has a cost that may look different for everyone. It’s also important to know that there may be a penalty if you don’t enroll in Medicare at age 65.”
It’s important to know that there are resources available. Start small, start today, and your future self will thank you. Not only will you enjoy a healthier life but a healthier bank account too. It’s a win-win!
