Living with a chronic health condition means that you're probably juggling a lot of additional expenses. While you may be able to scrape by most of the time, what would happen if you suddenly lost your job and your health insurance?

Planning for the Worst

It's always best to prepare for the worst-case scenario, says Derrick Kinney, a Dallas-based personal finance advisor and principal of Derrick Kinney & Associates. He points out that people with chronic conditions such as diabetes, asthma, depression, and many other health problems often need to be more careful with their money than the rest of the population, simply because they have more at stake.

"This means that being ready for anything can help you prevent a medical emergency from becoming a financial catastrophe," he says.

6 Ways to Protect Yourself

Here is his advice on how to prepare yourself for whatever comes your way:

1. Count the costs. It's important to build the cost of prescription drugs and other medical supplies into your budget. All too often people overlook these, and this can cause trouble later since the costs can add up quickly and can take money away from food and other essentials.

2. Stash the cash. Kinney advises aiming to put away at least one month of cash reserves for a rainy day, and over time to build this up to be enough to carry you for three months. Even if you live on a very tight budget, putting away even a small amount each week can slowly add up and can prevent you from having to use credit to pay for the essentials. To help you accomplish this goal, he recommends writing down everything you spend over a period of three months so you can see where your money is going and where you might be able to cut.

3. Protect your health so you don't lose your wealth. Studies show that people in poorer health spend more on medical insurance, health care costs, and medicine. Therefore, Kinney says that taking some key steps to keep yourself well can really pay off in the end—not only in how you feel but also in how much you have in the bank, too.

4. Shop around. Explore your insurance options so you'll be prepared in the event that you do lose your job. For instance, you may be able to buy coverage through your spouse's employer, or you can pay for COBRA to extend your health insurance for up to 18 months. While the premiums can be steep with COBRA, they can still be less than footing a hospital bill yourself. Kinney recommends doing some research online to find out your other insurance options and then comparison shop some of the plans. Also check into public options, such as Medicaid, to see if you qualify.

5. Communicate your situation. If you do incur medical expenses that you can't afford, Kinney stresses the importance of communicating with your providers to let them know your financial realities. They may be willing to work with you and come up with a payment plan that's manageable for you.

6. Start a health savings account. This allows you to set aside money for health care costs on a tax-favored basis. However, Kinney says he doesn't think this should take the place of having some extra money in the bank for whatever comes your way. A combination of both a designated health savings and liquid cash that you can use for anything is the ideal situation.

Every Dollar Matters

"If money is tight, it's worth considering where you can cut, since every dollar matters and over time, a little bit can add up to big savings," Kinney says. While you may not be able to control your health situation, he stresses that it's important to remember that you can at least control how you respond to it and how you prepare. For many people, that can be quite empowering.

Derrick Kinney reviewed this article.




Derrick Kinney, Personal finance advisor, Derrick Kinney and Associates. Phone interview. Aug 6, 2013.