If you are like 66% of American families, you have a budgeting problem and you are bleeding money every month and may not know it. It’s ok to admit it. Budgeting stinks! It’s annoying, tedious, disheartening, and essential! Budgeting for a Special Needs Family (SNF) is even more critical than it is for your neighbor.
Your neighbor probably has most of the same fixed costs as you do; housing, transportation, food, gas, insurance, utilities, etc. However, it’s the variable costs that eat SNF alive. I’m not talking about music lessons, sports camps, and shopping trips. SNF face steep variable medical costs and because they are variable, they by definition can change from month to month. Which makes budgeting a hassle, and even more imperative. In my last blog post we discovered that the average SNF faces over $10,000 a year in out-of-pocket medical costs. Some of our families are frequent flyers to the emergency room and depending on our healthcare plans, may face large co-pays on prescriptions, physical and occupational therapy, and durable medical equipment. The only way to survive these choppy financial waters is to budget, and budget well.
First, you need to get a good budgeting tool. If you are comfortable with the good old excel spreadsheet I used for decades then good for you. If you are tired of looking at all the cells and get mad when the autosum function doesn’t work right, then you need a new budgeting tool. Luckily there are some great companies that have developed very sophisticated tools to help you. Nerdwallet.com has a great post on the best budgeting apps and tools for 2018.
Next, take stock of where you are today. Open that excel spreadsheet (or open one of the handy budgeting tools) and capture all the money you bring in. That includes salary, bonuses, side hustles, government benefits, lawn mowing money, etc. If you earn it, or someone in your family earns it, put it in the pot. Next, lay out all your mandatory deductions. This includes payroll taxes, social security, Medicare, etc. Then account for and deduct your fixed expenses in a typical month. These include mortgage/rent, utilities, association fees, property taxes, insurance premiums, car payments, student loans, etc. The next deduction is your variable medical expenses. Do the best you can to get a good average on what you spend in a typical month on medical necessities. The last expenses are your “day to day lifestyle” expenses. These include cellphone and cable bills, restaurants, coffee shops, grocery bills, air travel, clothes and consumption goods, gym membership, entertainment, pet care, kids activities, etc.
Take stock of what you have left. Is there anything? You haven’t even accounted for savings or investing yet! If you’re like most people, then you waited to see what was left before you moved the remainder to a savings or investment account…and guess what? There is usually not much left at this point. If this is you, then you need to make some lifestyle changes to fit it all in. Which is exactly the reason why people hate budgeting to begin with!
Define your savings goals. The first goal should be your emergency fund. The rule of thumb is 3-6 months of fixed expenses. Because of the nature of healthcare volatility, I recommend you double it. Nothing will knock your budget to the dirt like an extended hospitalization. Next, you need to save for your own retirement. We know that the time value of money and compounding interest is a beautiful thing. If you defer your retirement savings even a little while, it will cost you huge in the long run. Remember, not only are you retiring for two, many SNF must plan a retirement for three! If you have planned ahead and have a Special Needs Trust in place, your retirement accounts also become a powerful tool to fund the Trust as well. Your remaining savings goals should include an ABLE account, 529 or other college savings plans for your other children, and any other goals you may have like saving for a house down payment, a new car, a wedding, etc.
Now, we are going to do this exercise again and I want you to ensure every dollar has a purpose and put it on auto. Before you list your lifestyle expense, pay yourself first. Account for your various savings goals. Don’t skimp on retirement or funding your emergency fund. Set up auto withdrawals. Some employers even let you set up a direct allotment from your payroll. Every dollar has to have a purpose in advance. If it doesn’t, it will flow out of your bank account and you will have no idea where it went or what you got for it. Next you get to negotiate with yourself (or hopefully your spouse) on how much of the remainder you will put against each of your lifestyle expenses. If you get to zero each month, that is ok. Don’t worry about it. You can rest easy knowing you funded all of the critical expenses first. If the entertainment budget went dry, think of all the good family game nights you just made room for!
To get your financial house in order you have to commit to a budget. Only if you commit to a budget will you have the tools and foundation to stop the bleeding.