Family health insurance is becoming more expensive. In 2022, the average annual premiums for family coverage were $22,463. In 2023, that number rose to $24,000. Meanwhile, the median American income is trending downward. According to a recent study, the median household income fell from $76,330 in 2021 to $74,580 in 2022, a decrease of 2.3%.
As a result, many families are feeling the budget crunch. While they recognize the value of health insurance to defray potential care costs, stagnating income paired with rising inflation — a 3.7% increase since 2022 — makes it challenging for households to manage both day-to-day expenses and increasing insurance rates.
Creating and maintaining a monthly budget can help families strike a better balance between costs, spending, and savings. Here are 15 budgeting tips to help make sure you can afford family health insurance.
Table of Contents
Tips For Setting the Health Spending Stage
Learn what you can do from the very beginning to best lay a firm foundation for health budgeting success.
1. Establish your goals
Budgets can have one large goal or multiple smaller goals, depending on what works for your family. In this case, the goal is affording family health insurance. Start by sourcing several quotes for health insurance to get a sense of average costs. This gives you a baseline when you start to build your budget.
2. Choose a basic budgeting framework
There is no “perfect” budget. What works for one family may not work for another, so it’s worth seeing what’s out there and what type of budget framework makes sense with your current income and expenditures.
One of the most popular options is the 50-30-20 budget. This approach involves putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. Rising inflation and flat incomes, however, may make this budget challenging.
Another option is the 80/20 budget, which sees 20% deposited directly into savings and the remaining 80% used however you see fit.
The 70/20/10 budget is yet one more plan in which 70% of your income should go to needs and wants, 20% to savings, and 10% to paying off debt.
Regardless of your budgeting framework, healthcare falls into the “needs” category, in addition to other costs such as your mortgage or rent payment, groceries, and utilities.
3. List your income and expenditures
Once you’ve chosen your budget framework, make a list of income and expenditures.
Income is any money coming into the household. This includes any money you and your spouse earned, interest on investments, and any Social Security benefits you receive. Expenditures, meanwhile, include bills, payments, and any spending throughout the month. They may include your mortgage payment or rent, utility bills, car payments, mobile phone bills, groceries, clothing, and any discretionary spending.
Family health insurance is also an expenditure. Its total cost includes your monthly premium, along with any copayments or coinsurance. While copayments and coinsurance are not consistent expenditures — they don’t apply if you don’t make a healthcare claim that month — it’s worth leaving some wiggle room in your budget for these costs.
Once you’ve calculated both numbers, subtract your expenditures from your income. If the resulting number is positive, you should have some money left at the end of the month. If the number is negative, you may be spending more than you are making.
4. Categorize your spending
Categories can help control your spending. Common categories include:
- Utilities: Electric, water, Internet, home phone, and mobile phone bills fall under this category.
- Debt: This category encompasses both secured and unsecured debt. An example of secured debt is your mortgage payment. Unsecured debt can be credit cards or auto loans — anything not secured by your home or other assets.
- Other monthly expenses: Recurring costs here may include car insurance, health insurance, property taxes, life insurance, groceries, clothing, and care products.
- Discretionary spending: All non-required spending goes here, such as dining out, going to the movies, or vacations.
Family health insurance falls under the “other” category. While it’s not discretionary spending, it’s also not debt — instead, it’s a recurring cost paid each month that forms a key part of your budget.
Tips For Lowering Overall Costs
Generally lowering costs can make more room in overall family budgets for emergency health needs as well as more discretionary spending. Learn how you can find spaces to save.
5. Compare your healthcare options
When it comes to family health insurance, you’ve got options. Take the time to compare and contrast what different plans offer, what they cost, and how this works with your budget.
If you’re unsure what type of plan works best for your family, you can do research on your own using tools provided by Healthcare.gov, or you can get more guided assistance by reaching out to a licensed agent or broker online, in person, or over the phone. Both of these options allow you to compare the plans available in your area.
6. Consider enrolling in an HSA or FSA
Enrolling in a Health Savings Account (HSA) or Flexible Spending Account (FSA) can help bring down overall expenses for your family because it can lower your taxable income for the year. There are slight differences between the two options:
- Health Savings Account (HSA): An HSA is an account where you can set aside pre-tax income for eligible medical costs, like doctor’s visits and prescription medications. HSAs are also attached the high-deductible health plans (HDHP), which typically offer lower premiums than standard health insurance plans. This type of plan is best suited for those whose dependents are in good health and unlikely to incur steep medical expenses.
- Flexible Spending Account (FSA): Offered by employers, FSAs are accounts funded by pre-tax payroll deductions that can pay for eligible expenses like copayments, deductibles, and some medications. FSA funds can be used by dependents and spouses, making it a way for families to better save for planned medical expenses.
Using an HSA or FSA could help families more efficiently set aside money for health-related costs.
7. Look for potential savings in non-health spending
In some cases, you may be able to reduce spending each month and cover the cost of health insurance. This cost-cutting typically comes from discretionary spending — for example, it may be possible to cut back on recurring costs like gym or sports club memberships.
There’s a caveat here, however. Good budgets don’t ask you to go entirely without entertainment or enjoyment. While cutting back a bit can help boost budget efforts, cutting out entirely can make it harder to stay the savings course.
8. Take control of your credit usage
Credit cards are convenient but can negatively impact your budget. Whenever possible, stop using credit cards and use debit or cash instead since this provides a more accurate representation of your current finances. If credit cards are the only option, do your best to fully pay them down each month.
While there may be circumstances where you need to use credit cards to cover healthcare deductibles or coinsurance costs, make sure to track these as part of your monthly budget so you can see exactly how much you’re spending.
Tips For Maintaining Health Budgets
Setting a budget is only part of the strategy in keeping your family’s healthcare expenses lower. Learn how you can keep your budget on track over time.
9. Budget as a family
Accountability is a key component of effective budgeting. If only one member of the family is responsible for the budget, it’s easier for spending habits to go off track. By sitting down once a month with your family, you can create budgets that work for everyone.
Along with needs such as clothing and food, take time to talk about healthcare. Is there anyone in the family who has a chronic condition? Over the last few months, have your healthcare costs increased, decreased, or remained the same? Equipped with this information, you can create a budget that fits your family.
10. Regularly review your budget
As your circumstances change, so should your budget. For example, you or your spouse might get a promotion at work, meaning more income each month. Or, you might change jobs and lose your employer-sponsored healthcare plan. During such changes, review your budget to ensure it still makes sense for your family.
Your current family income may also affect the cost of your health care plan. For example, you may be eligible for Medicaid coverage if your family income is equal to or less than 138% of the federal poverty level (FPL). This is the average requirement across the United States — each state has its own FPL thresholds.
11. Don’t expect perfection
No budget is perfect. Don’t expect to get everything right the first month, and cut yourself some slack if you occasionally overspend. Budgets are guidelines, not immutable rules.
If you find that healthcare costs are consistently putting a strain on your budget, consider making changes. For example, you may be able to increase your deductible and reduce your monthly premium. While this means more up-front expenses if you need health care, making this change can help make monthly budgets more manageable.
12. Expect the unexpected
Life rarely goes as planned. For example, you might find your home or car in need of sudden repairs or face unexpected family health issues. As a result, you may have no choice but to significantly overspend one month. This does not mean your budget is broken — instead, it’s simply the nature of life. If you stay the course, you may be able to underspend the following month and get back on track.
Tips For Organizing Medical Payments
Your family will likely have some health spending throughout the year, whether for routine doctor visits or sudden emergencies. Learn how you can best handle these expenses as they come up to minimize risk of missed payments and late fees.
13. Prioritize debt repayment
If you have any unsecured debt, prioritize repaying it first. This is because unsecured debts such as credit cards often come with higher interest rates than secured debts such as mortgages. As a result, the amount of these debts steadily increases over time, meaning the longer you wait to pay them down, the more you owe.
Having more debt can make it more difficult to pay for family health insurance. For example, unchecked credit card spending can increase your unsecured debt, and you may be tempted to temporarily cancel your health insurance plan and use that money to pay down loans.
14. Opt for automatic payments
Managing household expenses can be time- and resource-intensive. This may lead to late or missed payments, resulting in late penalties or damage to your credit score.
One way to avoid this problem is with automatic payments. Many financial institutions now allow you to set up automatic withdrawals at a fixed time each month. You may also be able to set up automatic payments through certain utility providers to ensure you don’t miss a payment. In addition, you can set up direct payment for your health insurance each month.
This means you won’t forget about your payment and helps you stay on track with your budget since you need to ensure you have enough money in the account to cover the cost.
15. Use digital budgeting apps
Online or mobile budgeting apps can help you track spending in real time. This allows you to see exactly how much you’re spending, where it’s being spent, and how it affects your budget.
Many of these apps let you create spending, savings, and other categories to track your costs and manage your expenses. Make sure to regularly review and update what you spend each month to keep your budget accurate. If your health insurance premiums increase, change this amount in the app.
Putting It All Together
Healthcare costs are on the rise, but paying for healthcare costs entirely out of pocket is challenging at best and nearly impossible at worst. However, by building a budget that focuses on accountability, transparency, and consistency, families can find ways to balance necessary, discretionary, and insurance spending.