- Disability Insurance
- Emergency Funds
- Government Assistance
Staying out of debt is tricky business in any way that you look at it. It takes time, effort, and, most importantly, a way of making more money than you owe. The problem can become much larger and more foreboding when you are disabled.
But disabilities come in many different forms, as nearly anyone who has seen an able-bodied person park in a handicap-only parking space knows.
From the get go, it is important to understand that a disability, in the sense that we are talking about today, doesn’t necessarily have to be physical. Emotional, cognitive, and developmental impairments can also qualify a person as disabled and can prevent them from working and playing like the rest of us. Furthermore, these impairments can have been around for birth or can come along later in life through an accident or an illness.
Whether or not you are currently disabled, it is important to consider your personal finances in the light of not being able to work again. Current studies and research shows that over 25% of young adult workers will have to quit working by the time they are 65 because of a disability. While most of these instances won’t be career-ending, the average setback will be two years.
The fact of the matter is that most Americans aren’t ready to deal with two years out of work. Luckily, there are many ways that you can prepare for an emergency like this without putting forth too much extra effort. Additionally, many disabled people today are using the four tips discussed below to stay out of debt while disabled.
By far the most effective thing that you can do to prepare to adequately deal with a disability is to invest in disability insurance. If you are lucky, you might even be able to take advantage of a short-term disability insurance plan through your current employer.
Basically what happens is that you pay a small amount of your yearly salary to your insurance. This is generally around 1% to 3%. If you do become disabled, you are entitled to between 50% and 60% of your annual salary – when you’re not working, this is a huge help.
Another best way to stay out of debt while disabled is to have an emergency fund handy. Disability insurance won’t be able to cover all of the costs of your being out of work.
A good rule of thumb is to work towards saving up six months’ worth of emergency savings. At this point, you might even decide to drop your short-term disability plan and put the money you would be contributing to it into your emergency savings instead.
While no one wants to rely on others, sometimes you just need to face the facts and accept a little help to get you back on your feet. Thankfully, the United States cares about those with disabilities and the government has a program to help those that are disabled stay out of debt.
It is important to note that you shouldn’t rely on government assistance. While many people end up needing to, it can severely limit the things that you can do, and thus your quality of life. Relying on public housing, Medicaid, and supplemental security income is not always an easy or comfortable thing to do.
Last but not least, is knowing debt. Whether or not you are currently struggling with it, it is of utmost importance to understand it alongside your own finances. This will help you more than you can imagine if you are ever unable to work in the future. A great place to start is our very own (and very popular) 25 Ways to Get Out of Debt resource. In addition to getting out of debt, it touches on staying out of debt and other areas of personal finances.
All in all, it is best to take all of the four tips discussed above into account when planning to stay out of debt while disabled. An accident or emergency can crop up at any time so it is best to always just be prepared.
It is even more important for those that aren’t able to access a disability insurance plan (whether it is because you are self-employed or work for a business that doesn’t offer its employees one) to start saving now. Even if you never have to use your savings for a disability-related emergency, you’ll know you will always have a little extra back-up money tucked away. And that’s a good feeling to have.
So investigate your options, start an emergency savings account, and hope for the best. Chances are that you won’t have to worry anyways. But, like always, it is best to play things safe.