How to budget for medical expenses

How to budget for medical expensesEven if you're insured, these bills are often jaw-droppingly steep.(Photo: Thinkstock)Unlike the cost of a new set of wheels or a college education, fees associated with a sudden health issue can come out of left field. Even if you’re insured, these bills are often jaw-droppingly steep. As such, it’s a smart move to build a robust savings plan that’s strictly for medical expenses. No health savings account? No problem Some experts point toward a health savings account (HSA) as the best way to save for medical bills, and for good reason. HSAs let you make annual pre-tax contributions of up to $3,300 for single people and $6,550 for families, which usually covers a health plan’s out-of-pocket maximum. However, not everyone has access to HSAs.Fortunately, HSAs aren’t the only way to go. In fact, creating your own medical emergency fund is painless, and just takes a bit of planning and discipline.Set a goalFirst things first: Establish a clear-cut savings goal. For a medical emergency fund, this figure can simply be your health plan’s annual out-of-pocket maximum. If you already know that you’ll have to cover recurring costs caused by a chronic illness or are planning an elective procedure, consider dividing that larger out-of-pocket sum into twelve chunks and saving that amount each month.”To save enough in your emergency fund to cover your deductible, it’s important to have a goal, and your deductible is a good amount to start with,” confirms Johanna Fox Turner, a certified financial planner based in Mayfield, Kentucky.Depending on the amount of money you’re able to contribute each month, reaching that sum may take several months, or even a full year. And that’s fine. As long as you get into the groove of placing a certain fraction of your paycheck into your medical emergency fund, you’ll be headed in the right direction.Use the money only for medical expensesOnce you’ve reached your target savings goal, you may be tempted to dip into your funds to fix your wheezing dryer, or to pay for that new television you’ve been eyeing. If you’ve been enjoying an extended stretch of good health, that money may seem like fair game. Fight these temptations as best you can. Otherwise, months of prudent savings will have been wasted, and if a medical emergency does rear its ugly head, you’ll have nothing. Keep your savings accessible Although you don’t want to use your savings for anything but medical emergencies, it’s crucial that these funds remain readily available. According to Fox Turner, the best place to store your emergency fund is simply in a savings account. Earning interest, she says, shouldn’t be your main priority.”Your emergency fund should always be kept liquid. The amount of interest it earns is really not a consideration,” Fox Turner says. “For that reason, I wouldn’t recommend anything beyond a savings account, not even a certificate of deposit, since those funds are locked in and will be penalized unless you are able to time your emergency to the date of maturity.”Final thoughtsFrom eating a balanced diet to exercising regularly, staying healthy requires maintenance. Part of that upkeep includes going to the doctor regularly and taking care of medical procedures if needed, which is why it’s worthwhile to invest the time and money in establishing your own medical emergency fund.As Asheville, N.C.-based certified financial planner David Hunter admits, “there aren’t a lot of magic bullets” for saving for medical expenses. Your best bet is simply to make a plan and stick to it. The financial sacrifices you make now will serve as a welcome cushion if your health takes a hit.NerdWallet Health is a USA TODAY content partner providing general news, commentary and coverage from around the Web. Its content is produced independently of USA TODAY.MORE: How much does a CT scan cost?
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