Foundry Mailbag: Dealing With Medical Expenses

Here’s the first edition of a regular column I’d like to do, called Foundry Mailbag, where I write about topics or answer questions that people have sent in. Today’s Foundry Mail comes from Cathleen, who writes:

I love your blog and would love to see a post about dealing with medical expenses. Personally that is my biggest challenge, trying to work expenses in if you have a chronic condition can be difficult to budget. (I’m not even going to go into what it’s like if you have an employer like mine that is too small to offer health insurance) I figure with all the hubbub about the recent Supreme Court ruling, it’s on many other peoples minds as well.

Keep up the good work!

First off, thank you for the kind words.

Medical expenses are like a horrible lottery that everyone has to play. Not only do you get sick or injured, but you sometimes have to pay huge amounts of money in doctor bills. Here are a few tips for dealing with them:

  1. Set up an emergency fund – This is the single biggest piece of advice I can give to anyone who’s getting their financial life in order. The size of the fund is up to you, but as a rule of thumb it should be a minimum of $1000, if you’re in debt or have other emergency spending needs. A healthy-sized emergency fund for someone with no debt is 3 – 6 months of living expenses. Store the fund in cash. Even though you’ll be getting a crummy return on investment, this is not money you want tied up in illiquid or volatile investments
  2. Expect the unexpected – I have a savings account named Doctor Bills into which I stash some money each month. When medical expenses do arise, I can tap into that account before draining my emergency fund. Think of this as being your own health insurance company. You’re paying yourself a monthly premium, and when something goes wrong, you get your bills covered by your own capitol. But unlike a real insurance company, you’re in control of the size of the premium, when you pay out, etc.
  3. Stay healthy – They say prevention is the best medicine, and I couldn’t agree more. Money spent on eating well, and time spent exercising and getting enough sleep will pay huge dividends down the line in the form of a healthy body, which means fewer doctor visits and reduced medical expenses. This also includes keeping a healthy attitude and eliminating stress from your life. A bike ride is my favorite way to stay healthy and de-stress.
  4. Negotiate your bills – None of the above tips will help Cathleen, or anyone else already saddled with large medical bills. But this tip might. Bills can be negotiated on two fronts: the medical provider and your health insurance company. I admit I’ve never done this myself, but I know it’s possible. Ramit from I Will Teach You To Be Rich is an amazing negotiator, and while he doesn’t discuss medical bills specifically, his general negotiation tips have saved me some money.
  5. Optimize for insurance – Now that the Supreme Court upheld Obamacare, people with pre-existing conditions can’t be denied insurance. That means you can shop around for a new job and make your decision of where to work based on the insurance plans that various would-be employers offer. Easier said than done, but it’s one extra tool in the financial tool box.

Hope I was able to help Cathleen, and maybe some other readers as well. Feel free to contact me if you have any questions.

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