The following is a post by my friend Syed. Syed is an optometrist by day and a blogger by night. He’s also enrolled in my coaching program and is doing very well! So I’m quite pleased to welcome him to the blog today to share his story.
The best way to describe having a baby is being on a roller coaster. There will be a lull right after a precipitous drop, but it usually won’t last long as the next drop is right around the bend. And just like a roller coaster, parenthood can be fun, exhilarating and stressful. One thing I wanted to make sure not to get blindsided by is the financial impact of having a baby.
I did my due diligence by interviewing other new parents and looking up the best prices for the thousands (yes there are a thousand) of things our boy would need. One aspect I thought I had in control was the hospital bills. I knew that health insurance wouldn’t cover everything, but it would cover most of it and with my FSA from work, I figured I could cover a good chunk of it tax free. To use an FSA effectively, it’s all about timing. I learned this the hard way.
The Good News
My wife learned she was pregnant around early April 2012. The doctor said that the baby will most likely be due early to mid January 2013, citing the fact that most initial pregnancies will result in delivery being on time or a little later (Wrong, doctor, WRONG!). The FSA enrollment period at work was in October, so I figured I could elect to have the max amount of FSA money ($2,500 at the time) to pay for the hospital bills, and cover the rest out of pocket if need be. Well, if need be became my only option because my son decided to come into the world almost 3 weeks early! Not surprised considering how he always has to be on the move nowadays (he’s almost 2 now).
Being the newbie that I was, I figured it wouldn’t make a difference. I triumphantly paid the first few hospital bills with my FSA card and thought I was all that. But a few days later I got an email saying my payment was denied and I had to call customer service. I talked to them, and they explained that in order to pay for the service with FSA money, the service had to have been performed in the same year. Which means my FSA is only good for procedures done in 2013. I was on the hook for all the bills out of pocket!
While this was not good news to hear, all was not lost. When I first started working full time, I set up an automatic transfer from my checking account to my savings account every month. I read that this was a good idea, so I set it up and never thought about it. Well it is an amazing idea and it saved my hide. This was the first time I was taking a significant amount of money out of the emergency fund, so I had more than enough to cover the hospital bills. And my God they just kept coming! One bill for the hospital services. Then one for the anesthesiologist. Then another one for blood work. I think the last few bills came in when my son was 6 months! American health care bureaucracy at its best.
I was also able to use my reward credit cards for the payments. I had a few cards which I needed to spend a certain amount for a sign up bonus, and I was able to charge the bills on the credit card and then simply move that amount of money out of my emergency fund to pay for the credit card bill. Score! I realized later I could have done this with my FSA as well by just submitting the receipts in, but that sounds like a lot of work.
Emergency. Funds. Matter. There are some in the finance blogosphere that look down on emergency funds because you can “put your money to work” in other places. Well if I listened to them and stashed that money in a retirement account I wouldn’t have been able to pay those bills with minimal stress! I would have had to work a lot more, gone into credit card debt or borrowed money from family and friends, none being very enticing options. Having an emergency fund on hand in an easily accessible online savings account is something I will never ever abandon. I knew that financial emergencies happen from time to time with a baby, but my little guy didn’t want me to wait!
As fate would have it, my wife needed a dental procedure that year and we both needed glasses so we were able to use the FSA money anyway. Things seem to work out for the best. But only if you have an emergency fund!
Syed is a personal finance blogger at The Broke Professional, which focuses on giving useful financial advice to new graduates. He also works as a full time optometrist. He has a beautiful wife and son who mean everything to him and is a really, really big New York Giants fan. Follow him on Twitter at @thebrokeprof
Editor’s note: I feel you 100%, Syed. Before I uploaded your post, I wrote 4 checks for various medical bills from the twins’ birth. They are 7.5 months old now and we’re STILL paying for stuff for them. It’s crazy!
Readers, has an emergency fund ever saved you in a bad situation?