Cystic Fibrosis – the Financial Deal

I was sitting at my desk on the Interwebs minding my own business when Jessica Link (@chronicuriosity) asked me a relevant question and made me go and think about my life some more. 😉 Good job, Jessica. She was in grad school until she got a job,  is well-motivated, has no debt, and no long-term relationship prospects for married insurance, and, of course, CF. I think that’ about covers her situation, with the question of how to budget for unexpected medical expenses, plan for retirement, and generally how I got by single. I hope this answers a lot of questions about finances while dealing with CF. If I missed something or glossed over something too much, please let me know.

Let’s dive in

Well, we can get that last one out of the way rather quickly. I was a miserable financial failure as a single. I didn’t get my act together until a few months before we got married, and even then, it took a lot of adjustment to kick my old habits and submit to the realization that the situation needed my full attention. We still owed some credit card money from my past stupidity and I still owed on my used car, but we knocked out that car within 5 months and freed up a couple of hundred a month for some breathing room.

We have learned quite a few principles along the way and, while we aren’t rolling in money, we aren’t lacking anything. The rules for finances are the same, only modified to prepare us for bigger hits. We’ve both been through a finance class that helped us budget some, but not completely. I’ve been listening to Dave Ramsey podcasts (his books are excellent for all) for over a year now and have heard the principles played out enough with both the trauma of being risky or foolish and the cheers of successfully managing money. I’ve been saddened and immensely motivated by the callers and now even more motivated by watching the show “The Secret Millionaire.” I wrote about that effect on me here.

Emergency fund

This is the bottom line, most important thing anyone, especially a CFer can have. Ramsey’s first baby step is $1,000 in the bank. Boy, that can seem like a ton of money when you’re where we started out. I remember distinctly being in my cube after 2 years climbing the corporate ladder just wondering – dreaming – when we’d have 4 digits in the bank after we paid the bills. Something. Always. Came. Up. It was embarrassing to me to have successful friends and family who didn’t wonder if they could use their check card to get gas when it got low, but that’s where I came from before marriage.

When CFers or anyone with a medical condition that requires a hefty chunk of their insurance policy with a single visit or prescription refill, you need to be prepared to, on the drop of a hat, pay out the entire year’s maximum out-of-pocket limit on your plan. I don’t care if it’s $1,000, $3,000, or $10,000. That money needs to be there or you’ll be in a position of deciding whether to get healthy or eat or lose the roof over your head.

For 2 examples… Last fall, Beautiful finally had to use her insurance to get allergy testing. After the test was done and we got some meds, we’d spent in excess of $1,000 at the doctor’s office. Bam, just like that. Then we found out her 2 main prescriptions weren’t covered, so those were both over $100/mo! I had my sinus surgery in October all free and clear since I’d met my limit months before, but then I needed surgery again in January, so we had to pay out all $3,000 of my annual max at once.

Our next step is to move up to 3-6 months of savings after all of those planned expenses are in the bank. See, those things are expected in our life. You can’t come into January and be surprised when your first Rx refill of the year costs $500. In fact, I find it hilarious to see the cashiers’ face each year as they apologize for what they are about to do with us. I just smile and say, “I know, it’s like this every year – not your fault.”

Debt

Don’t do it! We loved living debt free, I still kick myself for the debt we have now, but it’s a debt I’m ok with for the long-term goal, though I will never do it again. We used to have everything paid off and live in our apartment. Then we got our townhome and we financed our car to replace Beautiful’s 1997 Escort when it was on its last legs for the last time. We got a car that was 24 months old off a lease, valued $3k more than we paid, and after we paid the down payment and got the trade-in, we had significant equity. Then we refinanced at the credit union for 4% interest. We’d only owe something like $250 over the life of the loan from this point out.

Our only other debt is our home. This is where I struggle with dealing with it: the month after we bought it, the builder went bankrupt and our home values plummeted because no one was building and people were getting foreclosed on because they were part of the whole mortgage stink-up and should have never gotten a loan. The unit across the street was on sale for $60,000 less than we paid for ours, so I have been pretty bitter about our decision, even if it’s a god one long-term. It’s the lack of options that has me stressed. Well, that and the property taxes that keep raising our payments. I just hope it all is worth it if/when we need more space.

Disaster fund

Something that we realized that we need in place is a fund to pay for the biggest disaster I could face as a CFer: a transplant. One of the great things about me coming out of the CF closet in the last year has been getting to know a lot of post-tx people and get a feel for life after transplant. It seems like a safe estimate for doing any work at all is a minimum of one month and a conservative estimate for returning to normal is 6 months. Given we don’t know what issues would arise afterward (diabetes, GERD, prograf insomnia), I need to account for the possibility of not doing anything for 6 months. We are talking about some serious money, now.

Beautiful opened a new account that is absolutely no-touchy touchy. It’s our “transplant fund” just in case that time arrives. I don’t plan on it coming because I know a cure is coming soon, but I would be a fool to not plan for it. It’s still quite small, but it’s a start. I highly recommend it. Any feedback from post-tx people?

Insurance

Life insurance is easy. You can only get it as a CFer as a part of a big company plan that doesn’t exclude for medical conditions or require a medical underwriting. My last company offered 5x my salary without underwriting, so that’s what I got and that’s what I paid to transfer when I left the company. I believe it’s 10-year term, but I do need to be sure the length of the plan so we don’t get caught with our pants down. At this point, I can’t get another policy, I’m way uninsurable for term life as a CFer.

Health insurance is another matter with lots of different ways to go about it. I would avoid using anything associated with Obamacare in the event that the act is repealed or aspects of it are repealed that lose you the benefit that you need. I was sent information on switching my plan, and I didn’t want to bite on it and my clinic also advised sticking with what we know will work in the future.

Since there are so many ways to do health insurance, here is how I did it. I got a job when I was 21 that offered Cigna HMO and my clinic worked fine with it. No problems. When I left, I got COBRA for 90 days while I got a new job’s benefit package and got on Aetna HMO back in 2001. When that company collapsed, I got COBRA for a couple of months and got it converted to an individual, permanent policy for $110/mo in Feb 2002. I kept that policy while I worked at a small company that I didn’t think had a good plan for 3 years. Each year it went up $100/mo. By the time I got to my career path job, I was paying $425/mo.

It only took 90 days at that job before I felt secure in my spot there to take the plunge and get the company plan, which happened to also be with Aetna, only costing me $75/mo! I was in insurance heaven. I’d moved back home by then to get my feet under me from all of my bad financial decisions and bad breaks with jobs. I still couldn’t handle money, as I was often struggling just to pay my $250 rent. So sad! I moved out to get an apartment with a co-worker in my department and he bailed after 3 months, leaving me with a $1,000 rent! I got sick several times that year before our wedding, but then everything got manageable, but not great financially after that. Adding Beautiful to insurance only raised it a bit and we continued to get better jobs, which I’ll write about later this week. In fact, I wrote it while doing this one and realized I wasn’t answering the question. 😉

When I left my corporate job, I got COBRA. We lost it when we messed up paperwork, but I got another individual policy with Aetna, which I’ve had since 2008. So, I’ve been with Aetna since 2001 now. Beautiful got BCBS at her last job and just finally got her own individual policy settled with them for ~$150 and we pay $605 each month for my policy. We both have $3,000 max each year, so we budget according to that limit and our estimated co-pays that we have historically calculated pretty accurately. It would have been nice to not give our medical savings up after surgery, but it’s just not a reality for us. We are just very blessed to be a team that works well together earning and saving what we can for life’s nasty events. Very little can possibly surprise us in the area of medical finances, so long as insurance doesn’t get screwed up somehow.

You can bet we are more concerned about our health insurance payments than any other bill, including our mortgage. If we did have many sources of debt, we would pay bills in this order: med insurance, life insurance (cheap!!), mortgage, food, lights, water, medicine, Internet to keep working, car. Everything else can wait until there is enough money to go around to pay for everything. There is so much more that goes into our budget, but if push came to shove with a particular low income month, that’s the order, baby.

Retirement planning

Well, that’s a sad story for me, but I certainly know how I’d do it if I had a second shot. Over the years, I’ve cashed in retirement plans several times since I was 19 or 20. They always had at least $700 in them, so I’d hate to think about how much I’d have in retirement if I hadn’t been so broke and desperate before. The smart rule is that you shouldn’t take out of retirement unless it’s to avoid bankruptcy or foreclosure (more than a band-aid, too) because of the 40+% taxes that they hit you with. Would you borrow at 40% to pay off a debt to someone else? No!

We managed to hang on to my last retirement fund from my corporate job. It wasn’t much, and it plummeted even further with the slide that Wall Street took. If we’d had the money over the last 3 years to keep putting money in each month when it was on sale, we’d have quadrupled or more that money. Again, lessons learned. One smart thing we’ve done it convert it to a Roth IRA, so when we withdraw at the end, it’s all tax-free because I’m putting into it post-tax now anyway. I’m gov’t paranoid because we live in a country that doesn’t learn from history, and I don’t even want to think about what taxes are going to look like in 30 years from now.

The plan now is to get the car paid off and get up to our savings amount and then examine our budget to see when we can start investing 15% into retirement. It’s not going to happen for a while, but when it does, I’ll be sure to diversify in long-term, good history growth and stock mutual funds with a 20+ year history. Slow and steady wins the race. Even my meager portfolio shows that just from 2006 until now. It’s really taking off and I haven’t put anything into it since 2008, and even what I did put in was only 1/2 of it because it was matched by my employer.

If we are blessed enough to reach all of our savings goals, it would be really neat to invest in commercial real estate and get some contractual lease income to live off of without needing to work every day. Obviously, that is some time down the road, but we’ll see how business goes. I feel like we’re nearing a tipping point, and you know how much of an optimist I am.

Charity

People look at charity a good number of ways. I have a couple of rules about charity. First, it must be cheerily given, not under compulsion or forcibly taken. Second, it must not be given with any strings attached or else it’s not charity. Where people disagree on the topic most widely is what counts as a charity. Personally, I don’t consider “save the little yellow ducks that cross 3rd street” a valid charity. I call that a “cause” and one that falls way below one of the human helping magnitude of a local organization who feeds the homeless or sends supplies to troops or foreign countries. I place value on human life above all the animals, plants, and water. If we take care of people, the planet will take care of itself. Ok, I’ll get off my soapbox now, but you all know where I stand on that.

For us, we are tithing (10%) of our income to our church where we are members. They use the money for the operations, 20% off the top goes to missionaries, and we also do more and more community outreach to help those in need, like single moms and the elderly who need help around the house with yard work.

In order to keep, you must give.

Well, that’s my financial planning in 2,500 words. Where do we agree or disagree?