The One Big Reason Why We Are All Probably "Under-Saved"
Well, they call it an emergency for a reason. It is the unexpected expense you didn’t see coming. There are emergencies that you feel pretty certain could happen and then there are the emergencies that you think will never happen in a million years. It is the latter that can sneak up on you.
Medical expenses are one of those expenses most people don’t see coming and it is the one item we need to be planning for. Unfortunately, health expenses and health insurance are going to be an ever-increasing expense. People are having to resort to higher deductible plans. This can create a double whammy. First you have high insurance premiums and then you have high deductibles that have to be met even before you can use your insurance (which you are paying for). These are expenses that are rarely considered when calculating an emergency account. If you don’t have the emergency account, the credit card is the next best option.
A recent survey just released by bankrate.com had some interesting detail on medical debt.
“One in four people say they now owe more in medical debt than they have saved in an emergency fund. Among people who make less than $30,000 annually, 44 percent revealed that their medical debt exceeds their emergency savings fund. But even in higher-earning groups, of up to $75,000 annually, about one in four people say they're in that position, according to the Health Insurance Pulse survey.
In contrast, just 6 percent of people who make more than $75,000 each year said their medical debt is more than what they have saved up for emergencies.
And a majority of all respondents—55 percent—reported that they are either "very" or "somewhat" worried about being overwhelmed by medical debt in the future.”
Emergency accounts can be used for all types of unexpected expenses. Many don’t plan for the unexpected heath costs. Make sure you have enough money set aside to handle total out of pocket all of the way to the family out of pocket. That is your plan A. Plan A is being "saved up" for those unexpected heath care costs. Remember debt creation is your plan B.