I have been self-employed for nearly a year. And mostly, I love it. I have some incredible clients, earn more than I did in my previous full-time job, and can pursue some passion projects on the side.
But there have been moments when I get a stark reminder that this chosen path of self-employment, and individual hustle is a tough one. This time, the stark reminder came to me as I clutched a massive bill in the office of my dentist.
Over $3,000 the bill read. This was to cover the costs of a few fillings for my daughter and a tooth extraction for me. I looked down at my 7 year old daughter, with her gappy-toothed smile, and thought, how the hell could this cost so much?
This was my stark reminder that self-employment comes with some disadvantages. When you don’t have benefits, or aren’t covered by an extended health insurance plan, unexpected bills at the dentist can torpedo your finances.
Not purchasing health insurance, was a choice. When we looked at the pricing of an insurance policy to cover myself, my child, and my self-employed partner, we again got sticker shock.
We were quoted just under $5,000 in premiums a year for a plan that only covered a portion of our dental care, and had limits on what we could spend. Financially, this did not make sense for our family.
Canadians like us spend over $12 billion per year on dental services. And there are about 6 million of us that avoid going to the dentist altogether because of cost. I bet a significant portion of this 6 million are self employed, just like me.
But instead of avoiding critical dental expenses, there is another option — a health spending account. It allows you to write off 100% of your health, dental and vision expenses by running them through your company. This in turn reduces your taxable income. So if you do get whacked with an unexpected bill, and aren’t covered by a health insurance plan, it seems like the obvious choice. The one caveat is that you need to have a registered business to apply for the HSA.