Lillian, a 33-year-old freelancer in Toronto, is contemplating investing in private health insurance as she needs help managing her future health costs. As a freelancer with an unpredictable income, she finds it hard to budget properly. Her future health costs include medication, wisdom teeth removal, and purchasing a new pair of glasses.

We consulted financial expert Jason Heath, managing director at Objective Financial Partners for advice. Joel highlights that the average individual is unlikely to cut costs by obtaining private health insurance. To break it down, the insurance plan typically costs more in premiums than they offer in reimbursements. However, for the self-employed like Lillian, health care premiums are tax deductible, potentially saving up to 20% of her income.

If Lillian opts for insurance coverage, Jason suggests looking into group plans through industry associations or alumni programs. However, he suggests that the greater risk for freelancers is disability, therefore, disability insurance may be more beneficial than health care insurance.

When it comes to managing finances with an unpredictable income, Jason recommends looking at the past 12 months of earnings for a baseline income level. Deductions should be made for taxes and savings to start establishing an emergency fund. He strongly advises against falling behind on tax payments, so saving for tax and emergencies should be her main financial focuses. Lastly, if she has a lucrative month, she can either treat herself or save even more money, as long as she has met her saving target for the month.

Lillian appreciates Jason’s advice, but is still unsure about obtaining health insurance. She feels more secure knowing that as a freelancer, she has taken the right steps to manage her finances and she does already have an emergency fund. All these actions make the uncertainties of a fluctuating income a little bit less daunting.