Figure Out How Much You Can Pay
Budgeting your money is personal and depends on your expenses and priorities. Here are a few recommended ways to determine how to plan with your funds.
Use a set percentage for health costs. According to one consumer-counseling organization, the cost of your insurance premiums, deductibles, co-insurance, and co-payments should be about 4% to 6% of your monthly net income after taxes.
So for example, if you make $4,500 a month after taxes:
- You can start your budget by allowing $180 to $270 a month to pay for premiums, co-insurance, and co-payments.
- You can set aside $90 to $360 a month to pay for prescription drugs.
Add these amounts to the other expenses you have, such as your house payment, utilities, and transportation to see how the distribution works.
Divide your income into a pie. Another method for figuring out how much to set aside is to follow the 50/30/20 budget.
- Your needs equal no more than 50% of your after-tax income. Your needs include things like mortgage payments, utilities, food, transportation, and health insurance costs.
- Your savings equal no more than 20% of your after-tax income. This goes to savings, retirement, or your emergency fund.
- Your wants equal no more than 30% of your after-tax salary. Wants include cable TV, dining out, and vacations.
This method requires a lot of discipline and may not be realistic for everyone. But again, you can use it as a guide to help determine how much you want to pay for health insurance.
Keep in mind that these percentages are just a guide. You may need to pay more of your income toward health insurance depending on:
- The size of your family
- Your family's medical needs
- Your family's prescription drug needs