Yesterday I read an article in a magazine about people who had been getting by just fine until a serious illness put their finances into a tailspin. (sorry, I can’t remember what magazine I was reading – it was during my break at the library and I looked at several) Every one of the people featured had health insurance at the time of the illness. But paying deductibles put most of them into debt right away, and then there were continued expenses for medications and therapy. In the most extreme circumstances, the person ended up having to quit work, causing a serious blow to the family finances.
When my husband and I first started our health insurance agency, we were going further into debt every month. We knew we could make the business work, but the commissions were small in the beginning, and it would take time before they amounted to much. Some months we were able to pay our mortgage and not much else. Everything we couldn’t pay would end up on a credit card. By the end of 2004, we were making a dent in the nearly $40,000 debt we had accumulated. Since our business was making a small profit by then, we focused everything we had on paying off the debt. Next month, we’ll make our final payment, and it will all be gone. We’ve worked very hard at reaching this point, but we’ve also been pretty lucky. Neither of us has had a serious illness or had to quit work. We didn’t get pregnant (by design, but nothing’s foolproof). The health insurance industry didn’t go belly-up. Our house didn’t burn down or blow away. We didn’t have to provide care to an ailing parent. We did end up with a $5000 dental bill when my husband’s bridge fell out in the summer of 2005. That was a big bummer, and came at a really bad time, when we were trying so hard to pay off debts. But luckily we had never been late with any payments for anything, so our credit was still stellar. We qualified for a zero-percent loan for his teeth. The catch was that after a year, it would go up to 18%, so we busted our butts to pay it off in a year. By that time, we still had about $22k in total debt, but we made the dental bill a priority, and in May 2006, we paid it off.
So now that we’re almost back to having only a mortgage payment (and with a lot more padding in our IRAs than we had 4 years ago), we’re going to do our best to make ourselves as safe as possible. Cause luck only lasts so long. You never know when it will run out, and I don’t ever want to end up back in debt. We’re stocking our HSA right now to pay for a future childbirth ($3000) and my husband’s lipoma surgery(currently $1800, hopefully ends up being less). But once those expenses are covered, I still plan to max out the HSA every year. If we end up having to meet our deductible on our health insurance several years in a row, I want to know that the money is there already. We’re currently putting $100/month into an ING account (worth $600 right now). We’ll keep doing that, and no more raiding that account unless it’s a bona fide emergency.
Like most people, we have the big stuff in our life insured. Life insurance, health insurance, homeowner’s insurance, liability auto insurance (and we really need to get an umbrella policy from our P&C agent). But what I’m noticing is that lots of people who end up filing for bankruptcy had these coverages too. It’s the few thousand dollars that the policies don’t cover that end up pushing a lot of people over the brink. If you’re living on the edge, it doesn’t take much to wreak havoc. So now that we’re back from the land of big debt, we’re focused on building up our safety nets. If we have to pay out a few thousand dollars for an unexpected expense in the future, I imagine that it will suck, given my aversion to spending money. But I don’t want us to be wondering where in the hell we’re going to get the money.