The Amount We Spend On This One Thing Really Surprised Me

When it comes to planning your spending (sometimes called that nasty “budget” word), there are many ways to do it. I’m personally not one to track every penny or even allocate between shopping, dining out, travel or wine, but some people are. There’s no right or wrong way, just the way that works for you — diff’rent strokes for diff’rent folks.

While I don’t track specific categories of spending, I do like to be prepared for things that might come up that I can’t avoid, which is why I have a savings account labeled “car expenses” where I auto-deposit $25 per month — when something comes up with my car, whether it’s a dead battery, new tires or even just the annual oil change (I drive an older MINI Cooper, so it’s not cheap), I like to have the money set aside. What’s worse than having to cut back on wine because your stupid car broke down?

But a recent article that breaks down where paychecks tend to go caught my eye and has me considering adding a new auto-save category to my money. What caught my eye?

We spend an average of 8% of our income on healthcare.

Eight percent! If you had asked me what percentage of income I thought I was spending on healthcare, (not including fertility treatments), I probably would’ve guessed about 5%, which I would consider high due to the year I’ve had. (have I mentioned I hit my insurance out of pocket max in August?) But 8% really struck me — how many people are putting 8% into their 401k? If you’re not, I imagine it may be due to the fact that you feel you can’t afford it. But healthcare expenses are here and now — we can’t afford NOT to afford it.

So what to do with this revelation?

Planning ahead for the unknown

I’ve said before that the biggest budget breakers aren’t usually shopping sprees or vacations, although those can exacerbate the problem. What usually breaks budgets are random, one-time expenses that you really can’t predict. Or you can predict them, but you’re not sure exactly when they’ll strike, such as knowing your hot water heater is 13 years old, but for now it’s still steaming…

To get ahead of this, rather than trying to come up with the money to pay for healthcare expenses out of your spending money when they happen to pop up, just plan for them. Use the 8% guideline or find your own by adding up all your costs so far this year and dividing it by your income. Then set up a separate account just for healthcare expenses.

So if you make $60k, that’s $4,800, but keep in mind that the total includes any premiums, co-pays and even non-insurance covered stuff like acupuncture or therapy. If you have a Health Savings Account, make sure you are making full use of the tax-savings capabilities by running all eligible expenses through there. And if you happen to be reading this during open enrollment and use a Flexible Spending Account instead, make sure you’re not short-changing yourself by underestimating your expenses! It’s true that it’s ‘use it or lose it,’ but you can always stock up on band-aids, sunscreen and aspirin if you have some left over. (or try acupuncture!)

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