Budgeting tip: Medical costs

You don’t know when you’re going to be sick and need to see the doctor. That makes it tricky to include an allowance for medical expenses in your budget.

Medical expenses are included under the category of “irregular expenses” in my budgeting approach. You save a regular amount each pay period into a dedicated savings pool from which you later draw when the expense occurs.

If you’re just setting up your budget and haven’t been tracking your expenses for the past year you can get an initial estimate of your annual medical expenses from a combination of these sources:

  • Medicare online – allows you to download past 12 months and shows you net out of pocket
  • Your private health insurer –  online access or just call them
  • Past credit card and bank statements

As you complete your tax return this year you may need your Medicare claims history. Keep this information each year and over time you’ll get better at estimating your medical expenses.

Yes, sometimes you’ll have an unexpectedly costly medical bill. This can be covered from your budget’s contingency, which I’ll write about soon (so stick around).

View more budgeting tips or read the introduction to my Better Budgeting method.

Author: Matt Hern

Certified Financial Planner professional, Matt Hern has three times been awarded as one of Australia's Top 50 Financial Planners by The Australian Financial Review Smart Investor. He is passionate about guiding you on the right financial choices to achieve what you really want. Matt Hern is an Authorised Representative of Charter Financial Planning Limited AFSL 234665. All information is general advice only.