If I could wield the words of Shakespeare, I’d pen a sonnet for my love of rugby, the Saigon Geckos and that sweet ache you feel the days after giving it your all on the field. But alas, my literary prowess is limited and I’m nought more than your friendly expat financial prattler.
What I can do, however, is regale you with a tale about the price paid for the passionate pursuit of a try-saving tackle and the art of proactive preparation. Because, as it turns out, a packed season of tournaments and games has finally caught up with me!
Just this week, my Doctor confirmed that I have a Grade 2 PASTA rotator cuff tear. Thankfully, it’s not that serious, quite common for athletes and, while I’ll be out for a couple of months, I’ll be back in my favourite red jersey come September.
More importantly, though, I’m thankful that I have good insurance and take financial risk seriously - a risk that is all too often dismissed due to probability, rather than considered based on severity.
The PASTA Price (yes, I’m coining that term)
Now I’m not one to go to the doctor. Usually, I err on the side of “it’ll be fine” as opposed to “I probably need help to be fine”, but this time the inability to do anything of significance with my arm, and my wife’s insistence, pushed me to go to the Doc.
A $90 consultation, $550 MRI, $9.76 sling, $23.65 in meds and a subsequent $90 follow-up, totalling $763.41, is the current price for my PASTA! Put in other terms, that’s 25.45% of my emergency fund.
But it’s not really an emergency is it?
I play rugby and I know I might get injured. Since I know injury can lead to high medical costs, I have insurance. By taking financial risk seriously and making proactive preparations, a medical emergency isn’t a financial emergency.
Instead of spending 25.45% of my emergency fund on medical bills, I only spent 1.33% of my emergency cash. I’m out a grand total of $39.76:
$15 co-pay per visit (x2)
$9.76 sling (because medical equipment is rarely covered by insurance)
The Art of Proactive Preparation
But why am I sharing this story?
Since it’s not to brag about my shrewdness, I guess it’s because I hope to inspire!
The art of proactive preparation is about using every single financial tool at your disposal to create barriers between your financial health/stability and the risk of financial loss. It also gives you the peace of mind to live your life to the fullest without worrying about what might happen.
For example, unexpected medical expenses can be a significant financial burden, even for minor injuries. If I’d suffered from a full tear, I would likely have had surgery costing up towards $6,000. But I don’t have that much in my emergency fund and luckily I don’t have to. Knowing I’m covered by insurance significantly lowers the amount of liquid cash I need available.
Of course, insurance isn’t always the best thing in the world. It has its caveats and flaws just like any other financial planning tool. But, it is a great tool to transfer undue risk and it is one of many that you should consider when planning for the future.
Taking risk seriously and mitigating risk wherever possible is a surefire way to reach financial freedom.
So don’t avoid risk due to probability, plan for it based on severity.
What do I do?
There are 4 risk mitigation strategies: acceptance, avoidance, transference and reduction.
I use health insurance to transfer the risk of medical expenses to an insurer
I use avoidance to remove myself from situations where I might be at risk of financial loss
I accept that there will be times when I have unplanned expenses and have an emergency fund set aside to protect my financial stability
I diversify my investments between various asset classes, markets and industries to reduce overall investment risk
Luckily, the bill that has come due to me is simply physical, not financial.
Like it, love it, hate it? Drop me a comment or a question!
Yay for not needing surgery! And another fun piece. I both liked and loved this.