Even the healthiest person may develop a critical illness, like falling into a coma or suffering paralysis. When this happens, your finances can take a major hit. Not only will you have hospital bills to contend with, you may also be dealing with limited income if you’re unable to work.
Fortunately, if you work proactively, you can improve your financial situation dramatically.
Managing Finances Proactively
The best course of action is to prepare for a potential critical illness long before it happens. You won’t always have that opportunity, but if you’re reading this without a critical illness, the time to start preparing is now.
- Health insurance. Your first line of defense is health insurance. No matter how you feel about it from a political perspective, there’s no denying that healthcare in the United States is expensive—even if you have insurance. If you don’t have an insurance policy to protect you, you could end up in dire straits. In fact, about two-thirds of all bankruptcies in the United States are attributed to medical issues. Health insurance isn’t exactly cheap, especially if you’re purchasing a policy as an individual rather than as a group, but it’s well worth the investment to protect yourself from a health disaster.
- Critical illness insurance. Next, you’ll want to get a critical illness insurance policy. Even with a health insurance policy in place, there will be medical expenses you face as a result of your illness; for example, you’ll need to pay a deductible and cover out-of-pocket expenses. You may also be out of a job temporarily. Critical illness insurance will provide you with a lump sum benefit if you’re ever in this position. Get a critical illness insurance quote and start your journey right away.
- An emergency fund. It never hurts to have an emergency fund set aside to help you manage expenses in unexpected circumstances and, well, emergencies. Most people will benefit from having several months of expenses set aside, but you may want even more if you want adequate financial protection.
Managing Medical Expenses
If you’re suffering from an illness, your next step will be actively managing your medical expenses.
- Understand your insurance policy. Not all health insurance policies work the same way; they may cover different types of expenses or may only cover health providers within a specific network. Make sure you understand the full benefits of your policy and how it works; otherwise, if you go out of network or make an inappropriate choice, you could end up paying far more than you have to.
- Prioritize your health, but try to save money. Your number one priority is your health; you’ll want to take whatever measures are necessary to recover from your illness. However, it’s also a good idea to try and save money however you can. For example, you may be able to limit your stay at the hospital or cut expenses that may not be necessary.
- Take advantage of payment plans. Talk to your healthcare provider about a payment plan, especially if you’re dealing with major expenses (in the thousands of dollars). There may be a financial option available to you that reduces your immediate monetary burden.
Once you’ve successfully minimized your medical expenses, you may be interested in minimizing expenses in other areas of your life. For example, you might be able to sell some assets that you no longer need or aren’t using. You could cancel subscriptions that aren’t especially useful. And in extreme cases, you may consider moving to a smaller house or a less expensive area of town. Ultimately, you can save hundreds to thousands of dollars per month this way.
Supplementing Your Income
If that’s not enough, you may consider supplementing your income however you can. Depending on your critical illness, you may be limited in what you can accomplish. However, there are almost always options to save money. For example, if you’re unable to stand for long periods of time, you can make money by starting a blog or providing graphic design services. Any kind of side gig can help.
Free Up Cash
If you’re struggling to make your medical payments even after adopting these other financial strategies, you may need to take more desperate measures. If you have a retirement savings account or long-term investments, you can sell some of your assets and/or tap into those accounts to free up additional cash. This should be treated as a last resort.
Hopefully, you’ll never be in a position where a critical illness forces you to make hard financial choices. But if you find yourself there someday, you’ll be prepared. Work actively now to minimize the impact of a critical illness, and in the meantime, stay healthy.