Why & How to Plan Ahead for Health Care Expenses

Health care is something that most Americans overlook when budgeting. Medical debt child with nursecan get out of control if you don’t have health insurance or you don’t plan ahead for unexpected health care expenses.

But how do you plan ahead for health care expenses?

Here are a few tips that can help you start the planning process:

  1. Research health insurance plans and medical costs. To plan ahead for your health care expenses, you will need to understand what type of health insurance plan you have and the medical costs that you may incur in the upcoming year.
    • Determine how much to save based on your deductible, co-payments/co-insurance and/or out-of-pocket maximums. You can contact your health insurance provider to find out the amount of your deductible.
    • Estimate how much to save based on any medical bills you received in the previous year.
    • Calculate how much to save based on any prescriptions you had to pay for in the previous year.
    • Attend workshops and seminars presented by your employer or health insurance organization to get a better understanding of how to get the most out of your health insurance plan (and spend the least amount of money out of your own pocket).

Everyone’s situation will be different. Use what you think will be best for you to determine how to save money on your health care costs.

  1. Start the planning and budgeting process. A best practice is to use a budgeting tool to outline all of your monthly expenses, including any estimated health care costs. A visual map of your financial plan will give you something to follow to ensure you are meeting your savings targets every month.
  2. Consider Opening a Health Savings Account (HSA) or Flexible Spending Account (FSA). These enable you to save for health care expenses in advance (on a pre-tax basis). Not only are the funds untaxed, they can also be used to cover the cost of co-payments, co-insurance, out-of-pocket maximums, and prescriptions.

The Bottom Line: You’ll Save Money in the Long Run

Ultimately, planning ahead for health care expenses is like planning ahead for retirement. With retirement, you plan ahead to cover all of your bills in the future. The same concept applies for health care expenses. The money you save will enable you to cover the costs of any medical expenses you incur in the future.

Courtesy of Accel Members Financial Counseling, Destinations Credit Union’s partner to provide its members free unlimited financial counseling.

How Can I Save On The Costs Of Raising A Child?

You’re getting ready to bring home our own little bundle of joy. You’ve been
crunching numbers and don’t know how you can make the finances work without getting three or four more jobs, though! How can you save money while raising your baby?

Being a parent is demanding and exhausting work. It’s hard enough to work one job and juggle child care around normal adult responsibilities. What no one is fully prepared for, though, is the costs involved in raising a child.

New reports put the cost of raising a child from birth to age 18 at just over $300,000. That works out to over $16,000 per year. Of course, having children has rewards that are well worth the financial cost, but there’s nothing wrong with trying to trim those expenses. Here are four ways you can save on childcare costs:

1.) Use pre-tax dollars

While you may not be able to reduce spending in some areas, you can save money in the long run by taking advantage of a workplace benefit. If your employer offers a Flexible Spending Account (FSA), you can make an additional contribution to cover a variety of expenses related to dependent care. For 2016, parents are entitled to an additional $5,000 in contributions for a married couple.

Eligible services include medical care, day care, babysitting and even housekeeping, provided one of the duties of the housekeeper is child care. You can also use a dependent care FSA account to pay for delivery and other related expenses. Taking advantage of this program doesn’t reduce the costs of the services, but it does cut your tax bill at the end of the year. Unlike a typical FSA, a dependent care FSA can only reimburse you with money you’ve already spent. This means you may have to wait a while as the balance builds before you can take advantage of the program. Still, when coupled with programs like the Child Care Tax Credit, you can save money come tax time.

2.) Ask for hospital freebies, but skimp on extras

Young children, especially newborns and infants, need a lot of stuff. Between diapers, formula, skin cream and baby powder, those costs can add up quickly. Rather than rushing out to buy it all in the weeks leading up to birth, though, consider letting the hospital foot the bill for the basics.

Companies that manufacture baby products know their biggest source of revenue is in repeat customers. They’re eager for you to try their products, knowing you’ll definitely be in the market for more of it. In many cases, they’ve partnered with hospitals to provide new parents with a starter kit of everything they might need. The only catch is that people working in hospitals frequently forget to give them out. Be sure to ask someone working at the hospital if there are any samples of baby goods or coupons you can take home. This strategy can work from birth through early childhood; many pediatricians also partner with baby supply brands.

On the other side of hospital expenses, much of the cost of delivery may be optional. For instance, many hospitals have an incredible surcharge for private delivery rooms. In some cases, that surcharge can be as much as $500 per day! With nurses, doctors and family coming in and out, even so-called “private” rooms won’t offer much privacy!

3.) Think before you upsize

Growing families need growing homes. There’s no question about that. However, when it comes to timing that upsize, new families should think about their immediate needs. The hospital bills and other expenses can really take a bite out of your savings, making the months after childbirth a poor time to think about a new home.

Before you start shopping for a new house, ask around about how much space newborns actually need. Can a crib in an office or guest room work for the time being? It’ll be a few years before your child will need the privacy and independence of their own room, and your other housing needs may change in the interim. Hold off on moving until you’re in a better position to do so.

4.) Don’t let guilt win

Much of the baby products industry is built on guilt. No one wants to talk about money when it comes to things that might help a baby’s development. That’s how companies can get away with charging hundreds of dollars for plastic toys.

The inside secret is that babies don’t need your stuff. They need you. Children thrive in supportive, caring environments, not just those filled with the latest and greatest baby “learning” toys. So, when it comes to birthdays, Christmas or “just because” gifts, remember that the best gifts really are free. Spending time with your child is the most precious gift you can give.

YOUR TURN: Parents, what were your biggest spending regrets from early childhood? New and expecting parents, what are you most worried about for your new little bundle? Let us know in the comments!

Common Mistakes During Open Enrollment

Fall is a time of many changes. The temperatures cool, the leaves change color, and the world starts getting ready for winter. With all that change, there’s one thing people often leave the same: their workplace benefits packages.

November is the beginning of the open enrollment period for many workplace benefit plans. It’s also the open enrollment period for insurance policies on the Obamacare marketplace. This makes it an excellent time to review your insurance information and other benefits.  Destinations Credit Union has a partnership with TruStage Insurance which offers members good pricing on plans through the marketplace.  Watch our website for details.

These perks may have been a big part of what drew you to your job in the first place, so it makes sense to get as much out of them as possible. You may be paying too much (or too little!) for health insurance, and now’s your chance to fix it. Be sure to watch out for these three common pitfalls when enrolling in workplace benefits.

1.) The passive opt-in

When starting a new job, it’s easy to be overwhelmed by the barrage of paperwork and decisions. Health insurance decisions are just one of the dozen new responsibilities, so they get a fraction of the attention they deserve. For many people, though, those are the health insurance choices they stay with for much of their careers.

There are two key reasons why sticking with the default option may be a poor choice. First, your life situation has likely changed. As you get older, your need for more comprehensive health coverage increases. You may also need more extensive dependent coverage or you may have more disposable income to contribute to an HSA or FSA.

Second, your employer’s offerings may have changed. Most companies renegotiate their insurance rates annually, and may have negotiated for greater flexibility, lower premiums or better coverage. These are only options you’ll discover if you sit down with your HR representative and figure out your coverage for the next benefits year.

2.) Forgetting spousal benefits

Doubling preventative solutions is rarely a bad thing. Having a belt and suspenders seems like the most cautious way to keep your pants up. However, when it comes to health insurance, being covered by both your and your spouse’s plans can be a serious financial hazard.

First, you may be paying more than necessary. Adding a spouse to a workplace policy is usually cheaper than paying for two separate policies. Take a look at both policies and see which one provides the right combination of better prices and better coverage.

More dangerously, double insurance can frequently leave you in the middle of a fight between insurance companies. Both will insist that the other should pay first, and you could wind up buried under a mountain of paperwork for coordination of benefits. This trouble can compound when there are children covered under multiple policies. While you’ll never be on the hook for the whole charge, you may have to work twice as hard to get covered.

If you and your spouse are on different enrollment periods, most companies will provide a preview of the planned benefits offerings outside open enrollment. This allows you and your partner to review and consider the available options. Picking one insurance plan for both of you can really cut down your costs.

3.) Ignoring HSA/FSA options

Enrolling in a Health Savings Account (HSA) or Flexible Spending Account (FSA) can sting at first. Seeing dollars go out of your paycheck before you spend them hurts. Don’t let that deter you, though.

HSAs and FSAs are similar in function, but there are important differences. Both allow you to contribute pre-tax dollars that you can use for health care-related expenses. The difference is that HSAs rollover their entire remaining balance to the next year, while FSAs only rollover up to a certain limit established by your plan. There are other differences, like whether or not the account follows you after you leave the company, but the principle difference is the rollover effect.

Enrolling in one of these accounts requires estimating your healthcare costs for the next year. For most people, the safest assumption is that you’ll spend the same amount next year as you did last year. However, if you’ve got a planned medical expense, such as a pregnancy, surgery or other major issue that will arise next year, you can get an estimate to guide your contributions.

Funding an HSA or an FSA is basically free money off your taxes. One way or another, you’ll have to pay for health care costs. By designating money for it early, you can avoid paying taxes on money you’ll spend for health care.

No matter how long you’ve held your current position, it’s worth revisiting your benefits options once a year. Don’t just throw away the paperwork about your insurance, and don’t skip the informational policy meetings. Be an active participant in your benefits decisions. After all, you’ve earned them.

YOUR TURN: Insurance questions are difficult. What matters most to you when picking an insurance policy? Help your fellow benefit strugglers in the comments with your best advice!