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How To Plan A Budget for Medical Bills and Medical Debt

Medical Bills can serve as a potential dent in your budget. Knowing how to budget is the key to effectively ending any type of liabilities including unpaid medical bills or medical debt. It is always hard to estimate when you will have health problems so it is best to always put some cushion or room in your budget for medical insurance and out of pocket medical expenses. If you currently have unpaid healthcare bills now, budgeting may be a way to see what you can eliminate to make payments. The budgeting process can be thorough and timely, but well worth the worth it because no one wants financial strain or mounting medical bills. It is estimated that almost 70% of medical bill issues can be prevented with effective medical insurance and proper budgeting.

Here are general rules for creating a budget that can focus on medical bills:

1) Gather all relevant document information from bank account statements, credit card statements, medical bills and other bills to payment stubs. The key here is to get documentation to analyze income and spending sources and well as monthly averages.

2) Create a spreadsheet or write out a way of recording your current necessary expenses and discretionary spending. Necessary expenses would include housing, food, transportation, medical insurance, for work and other activities. Next, gather all expenses you do pay but isn't necessary. The key here is to understand what costs are fixed or will always be there no matter what (like Rent and car insurance) versus expenses that are sporadic. To get a better average total your fixed costs (cost that don't change like rent, utilities, car insurance) and then average your "nice to have" expenses. Once you have both averages you can add them together.

3) Next write down all of your income sources. If you have multiple jobs, then make sure to factor in income. If you are in sales, or you get bonuses it is best to not factor in bonuses and with sales use your average commission as a metric. The point is to estimate your income without being too aggressive.

4) Analyze what you spend in medical bills and medical insurance on a monthly average. If you have documentation of your bills, then you can see what you have paid in medical bills so you can extrapolate (forecast). This will help you analyze too how good your insurance plan is. Break down the expenses by expense type: emergency care (if there was some), surgery, and regular check-ups etc and average them in order analyze what your typical expenses are. NOTE: With averaging make sure to exclude any expenses that were high and unusual. The key here is to get the best average of your medical expenses.

5. Subtract your medical expenses from your average monthly income (Avg. Income - Avg. Expenses). If this number is positive then you can save this money in case of a rise in unexpected expenses or invest it. If the number is negative, you are in the red, as your spending will not be supported by your income. You need to go back to your expenses spreadsheet or tally to see what you can eliminate in order to balance your budget.

6. A good rule of thumb is as follows below for what your budget allocation percentages should be for certain expenses. The key is to run these low and high percentages with your monthly net income. This will help you understand where you can reduce on certain types of expenses.This will help you make room for higher medical expenses if you have a mental illness, disease, disability, or you are frequently sick. You can see by using the guideline percentage below if you are above the average.

Recommended Monthly Budget Percent Allocations For Expenses After Net-Income

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