Should You Use Your Emergency Fund For Medical Procedures?

July 05, 2017

After sharing our decision to pursue in vitro fertilization and how we’ll pay for it on the blog last week, I was a bit overwhelmed with the outpouring of support from friends, family, colleagues and even complete strangers. THANK YOU for your words of support and prayers, they mean so much to us!

I’ve also been asked by a few people why we aren’t using our emergency fund or Health Savings Accounts (HSAs), and those are great questions! Here’s my answer:

Using your HSA

Anyone who has discussed the benefits of the HSA with me knows that I actually emphasize the S in HSA for savings — rather than use the funds I’m accumulating in my account for everyday medical expenses like co-pays and minor bills, I’ve been paying for those things with my out of pocket spending money. The thought is that we’ll let our HSA money build up for when we have a big medical expense that we wouldn’t be able to pay out of pocket, while realizing the tax savings along the way.

Well, that day just came sooner than we had planned, so we WILL be draining our HSAs, it’s just a bit of a drop in the bucket compared to the total cost of IVF. Between my HSA and my husband’s, we can’t even cover the cost of the medication required, but we will cover what we can with this tax-free money.

Why not use the emergency fund?

As urgent and important and life-changing as this is for us, we do not feel that undergoing fertility treatment is an emergency in the way that the financial emergency fund is intended. We are stretching ourselves financially to do this, but we still need a back-up in case one of us loses our ability to earn income, which is really what the emergency fund is for —

To keep a roof over your head,
Food on the table,
Transportation to work and
Other basic needs met during times of unexpected income disruptions.

It’s why my colleague Erik wrote about the emergency fund taking priority over paying down debt — it’s your first line of defense against “life happening,” even if it’s not earning a ton of interest and you’re paying interest on other debts in order to keep it in place.

At the end of the day, we are choosing to undergo IVF. It’s true that without it we may not ever have biological children, which would change our life plans and be tremendously sad, but that’s not an emergency. It sucks, don’t get me wrong, but no one will be homeless or go hungry if we DON’T do this. We feel a tremendous sense of gratitude and fortune to even be in a position to make this choice – many people are not, which also makes me sad.

Sometimes it can feel like you don’t have a choice, like if you have an accident and receive a $10,000 hospital bill. While it’s important to make a plan to pay your medical debts to avoid them going to collections, depending on your personal situation, using up your emergency fund may not be the best place to turn — what happens if you’re unable to work and pay your rent? That’s what your emergency fund is for. (caveat: sometimes it DOES make sense, but that’s why it’s called “personal” finance)

Keep that in mind the next time you feel tempted to tap your emergency fund — is it a true emergency that will literally keep you housed, fed, clothed and employable? If not, it’s best to seek another way to pay or to make a different choice.

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Should You Go Into Debt To Get Pregnant?

June 28, 2017

After trying for nearly two years to conceive, my husband and I recently learned that our best chance of having a biological family will require us to undergo in vitro fertilization. If you or anyone you know has undergone this treatment, you probably already know that it comes with a hefty price tag and is rarely covered by insurance. Total costs vary according to each person’s needs and the community you live in, but generally the base cost is at least $12,000, and can easily exceed $25,000.

And that’s just the cost to GET PREGNANT. If it works, then I’ll also have to deal with the normal maternity costs that every expectant mother has to deal with like co-pays, co-insurance, etc. And don’t get me started on the cost of “gearing up” for baby – diapers, crib, car seat, the list goes on… but that’s a post for, hopefully, the near future.

In addition to the high price tag of IVF, the decision to pursue this method of family planning is often made in a time-sensitive situation – in less than a week I’ve gone from my initial “exploratory” consultation to starting the treatment. In other words, there isn’t really a lot of time to get your financial ducks in a row like you might have when planning to buy a home or some other expenditure that requires a big cash outlay up front.

Like most people I know, we don’t just have several thousand dollars lolly-gagging about in our accounts, which has us making a list of the pros and cons of various ways to fund this decision.

Things to consider

Your values. The first question we asked was, “How badly do we want this?” Some people will stop at nothing in order to have a baby, while others have a more, “If it’s meant to be, it will be,” attitude. I think we’re in the middle – willing to try this treatment, but we have already decided where we’ll draw the line if it doesn’t work. Kids are expensive enough to raise – sacrificing our financial stability to get pregnant in the first place doesn’t make a ton of sense if any debt incurred will cause stress in our lives and perhaps even our marriage. We feel very fortunate to even have this choice to make, and take our responsibility to our potential future children very seriously, including deciding not to have them if it means we won’t be able to provide them a stable home and life.

The add-ons. As with many big purchases, there is the “basic” level treatment, but there are also a variety of “add-ons” that are mostly optional. Some of the add-ons simply increase the odds of success, while others, like genetic testing of the embryos, ensure that any baby you do have will be free of genetic defects. To a certain extent, this also comes down to values – I’ve always felt that if God gave me a special needs child, that would be the path my life was meant to take. But now we basically have to answer the question, “Would you be willing to pay $7,000 to NOT have a special needs child?” I’ll be honest – I’m struggling with that one. It feels a bit like a “first world problem.”

But the secondary question is, since we’re already making this investment, why not chip in enough to give it the highest odds of success? In that case, it’s a cost-benefit analysis where you weigh the odds versus your own ability to absorb the cost without too much of a long-term financial impact.

Should you go in to debt?

Obviously we’ve already decided we want to have kids, so at the end of the day, this is mostly a financial decision with a side of manageable health risks. Since we don’t have enough cash on hand to fully fund the procedure, we are exploring several ideas. Here’s what we’re considering:

IVF loan. Yes, such a thing exists. However, when I saw that there is not only a 7.75% interest rate for those with the best credit scores, but an annual fee for the life of the loan, I crossed this option off our list.

0% promo rate credit card. First of all, we’d have to apply ASAP and hope that the credit limit granted is high enough. The primary consideration, however, is could we pay the card off by the time the promo rate expires? To figure that out, just divide the total amount by the number of months the rate is offered. For example, if the treatment costs $20,000 and the rate is good for 18 months, the question is, can we afford $1,111 per month? (yikes) This option also requires excellent credit.

401(k) loan. The interest rate is lower than the IVF loan and at least I’d be paying myself back, but I also have to consider that I’ll be forgoing possibly higher investment growth while I’m paying the loan back. (here’s a bit more on the pros and cons of this option)

Home equity line of credit (HELOC). The interest would be tax deductible, but also variable, so with rates going up, this could end up being more than the IVF loan if we take more than a year or two to pay it off. Plus this only works if we have enough equity and if the fees aren’t ridiculous either.

Rewards credit card. Putting IVF on a new Southwest Rapid Rewards card would be enough to earn me a companion pass pretty much right out of the gate, but it comes with a 16%+ rate. This option only works if we have another way to pay off the card right away, like taking out the HELOC. On the other hand, MONEY magazine has a great list of cards that come with low interest rates, so this is the other option.

How we’ll do it

Since the monthly payment required to pay off the 0% card is more than we can afford, we’ll most likely go with a hybrid:

Put as much as we can afford to pay monthly on a 0% card, then make sure it’s paid off before the promo expires.
Put the balance on my new Southwest Rapid Rewards card, then pay that off with a HELOC.

Using the rewards card to get the points buys us a couple weeks of time to line up a HELOC through the bank, but it will be important to have the cash in hand to pay off the card by the time the first statement is due. Even a $10,000 balanced carried over for one month could cost us $160 in interest.

At the end of the day, I’ve always known that by putting off having children while I pursued my career and found the perfect life partner for me, I was risking having to go down this road. If this process works, there will be no regrets. If it doesn’t work, at least we’ll know we tried everything we could, within our own personal limits.