We should all plan on being a caregiver someday, as there are no guarantees on lifelong, good health. On average, caregivers spend $7,000 to $13,000 out-of-pocket to care for their partners. While these costs may be unpredictable, it’s still important to budget for them. Most caregiving in the United States is informal and not done through paid keepers, meaning friends and family of the person in need volunteer to help.
Caregivers don’t help for money, as around 53 million Americans work an average of 20 hours each week without compensation. Most do it out of love, with an unfortunate result of the caregiver’s personal finances suffering. With the rise in out-of-pocket costs, allocating medical expenses for you and your loved ones into your budget should be a top priority. By having money set aside, you’ll be better prepared if any unexpected medical costs come up.
To help avoid paying thousands of dollars of your own money out-of-pocket, it’s extremely important for caregivers to understand their own money and budget. Coming up with a plan to manage your spending doesn’t have to be difficult, as a little planning and preparation can benefit you in the long run.
Add Up Your Health Costs
Now more than ever is the time to start planning ahead and understanding how to budget. To avoid financial strain as a caregiver, make a point to understand your own financial wellness. When coming up with a plan to balance your healthcare savings and spending, it’s helpful to section your costs into categories:
- Fixed monthly premiums: These are the expenses you can count on, like the set amount you pay on your insurance.
- Routine out-of-pocket expenses: These are anticipated costs that fluctuate, such as your copay for an annual visit or the cost of a regular prescription.
- Unexpected costs: These costs are the most difficult ones to budget for, like an unplanned surgery or injury.
It’s a smart plan to set aside 5% of your net income for fixed and variable costs, but one of the best ways to begin budgeting is to go back and determine how much you’ve spent in previous years. Look back on past bills, receipts from your insurance provider, and your credit card statement to see how much you’ve put towards out-of-pocket costs in the last year.
Find Ways to Save
Research shows an estimated 46 million people, or 18% of U.S. adults, could not afford quality healthcare if they needed it today. If you or your loved one have unexpected medical bills this year, know you have options to help you pay them off. Start by asking for an itemized bill to determine if the billing was done correctly. It’s possible for there to be errors, like incorrect insurance information or duplicate billing. Consumers may not realize that you can contact the hospital or healthcare provider and ask to negotiate bills.
Medical providers typically can work with you to come up with a payment plan for your bills. Payment plans are one of the simplest ways to pay off bills over time if you can’t afford to cover them in one payment. The bill can typically be broken into multiple equal payments over a few months. If your medical provider doesn’t accept payment plans, a medical credit card is also an option. They’re typically used for medical procedures and have an interest-free period of 6 to 12 months, just make sure you’ll be able to pay off your debt within this timeframe, so you don’t end up with a deferred interest rate.
If the thought of owing bills for months on end concerns you and you’re a homeowner, you also could look into how to refinance a mortgage. Refinancing your home could be an opportunity for you to find that extra money you may not have accounted for to begin with. Take advantage of low interest rates and what a cash-out refinance can give you. This might be a way for you to secure extra money to not only put towards medical debt, but for your monthly premium and prescription costs as well.
Utilize an HSA or FSA
Having a health savings account (HSA) or a flexible spending account (FSA) is a great tool to budget healthcare costs. Both an HSA and FSA account allows you to put aside money for qualified medical expenses, like deductibles and copays that you’ll have access to. To qualify for an HSA, you must be enrolled in a high deductible plan and if your employer is offering the HSA, you’d likely fund it pretax from your paychecks. You can also invest your HSA funds, allowing your balance to grow tax free.
Like an HSA, you can use your FSA on the same medical expenses. While money with an HSA rolls over each year, money on an FSA is considered “use it or lose it,” meaning you’ll lose any money left on your account at the end of the year unless your employer offers a rollover option. The funds in this account come out of your paycheck before taxes in regular increments.
Everyone including caregivers deserves to live a healthy and happy life without financial strain. Understanding and managing your healthcare budget will save you so much time and money in the long run. Taking the necessary steps to manage your healthcare budget could help you feel more confident in your financial situation.