If you’re between the age of 30-40, you could be under severe threat from a growing crisis affecting millions of working Americans today.A crisis so powerful, it can put massive risk on one of your biggest assets: Your income. Is it possible you could be on the verge of ability and disability? It could go either way.
It’s a word that’s not reserved solely for combat veterans or individuals confined to a wheelchair. That word is ‘disability’ and many Americans are experiencing severe financial difficulty because of it.
But by taking the correct preventative measures and understanding how to protect your income from the impact of disability, you’ll not only be prepared for the worst, you’ll also be protecting your greatest asset which is your ability to earn an income.
And that’s exactly what we’re going to show you how to do in this episode.
– Here Are The Show Highlights:
– Expect the unexpected: What actually happens if you suddenly become disabled ([5:25])
– The 3 ‘invisible’ pains of a lack of ability ([7:10])
– The double whammy effect of a disability…and how to make sure you’re prepared for the worst ([8:00])
– What Grandma would do to shield her income and protect her wealth ([9:00])
– Emergency savings – how much is enough? ([10:20])
Remember to download Grandma’s Top Tips by dropping into grandmaswealthwisdom.com/toptips. Time-honored wealth strategies served with a helping of balance and trust.
If you’d like to see how Grandma’s timeless wealth strategies can work in your life, schedule your free 15-minute coffee chat with us by visiting https://www.grandmaswealthwisdom.com/call…just like Grandma would want us to do.
A hearty welcome to Grandma’s Wealth Wisdom with your hospitable hosts, Brandon and Amanda Neely. This is the only podcast for strategies to grow your wealth simply and sustainably like grandma used to. Without further ado here are your hosts.
Brandon: Hey, I'm Brandon and welcome to Grandma's Wealth Wisdom where we work with you to cut through financial noise and create a wealth building strategy that's simple, sustainable and that Grandma would be proud of.
Amanda: And hey, I am Amanda. Today's episode is titled "On The Verge Of Ability". We're going to be digging into one of the biggest risks
to your income when you're in your 30's and 40's. See if you can guess what it is before we reveal it later in the episode.
Brandon: But before we get into that, first I want to read another five star review, and this comes from our producers at the Podcast Factory, and what they say is, maybe they're biased because they're our producers, but I like but they had to say. [0:01:14.3] They say, "Forgotten wealth wisdom. Brandon and Amanda have a struck a nerve with this new show. They're bringing back the common sense approach to wealth building that made America great. These forgotten tips are as good or better today than when grandma shared them with us decades ago." Hey, thanks Podcast Factory for giving us that awesome review.
Amanda: Yes, thank you. As you may have heard, ratings and reviews are super helpful. They help us know we are making an impact and they help bring the podcast to more people. We decided that we're not beyond bribing you to leave a review. Here's the deal. If you write us an honest five star review, we will share it on the podcast. [0:02:00.2] Plus, if you take a picture of your review and send it to you hello@GrandmasWealthWisdom.com we'll send you a copy of the best selling book by Pamela Yellen, The Bank On Yourself Revolution. As long as you're in the U.S. we'll send you a copy in the mail or the Kindle version, your choice. So write honest five star review and send it to you hello@GrandmasWealthWisdom.com and you'll get the book for free.
Brandon: That sounds like a sweet deal, Amanda. Okay, let's move on. Now onto today's topic. On the verge of ability....
Amanda: Have you guessed it yet? Do you have an idea of what the biggest threat to your income is when you're in your 30's and 60's? Let me get a drumroll, Brandon. The biggest threat to your income when you're in your 30's and 40's is disability.
Brandon: Oh, that's not a good drumroll.
Brandon: Disability? A drumroll for disability? Seriously, becoming disabled is more likely than a recession. [0:03:01.3] In your younger
years becoming disabled is even more likely than dying.
Amanda: Yeah, in fact, if you're 20 years old today you have more than a one in four chance of being out of work for at least a one year because of a disabling condition before you reach normal retirement age, and the source on that is the one and only Social Security Administration, of one in four chance of being out of work for at least a year due to a disability.
Brandon: Wow, that's big. That number has remained pretty stable over the years too, from what I read. I mean in grandma's day people were still disabled at roughly the same rates, but sadly they were largely ignored or forgotten about. Today, thankfully we have greater protections for people with disabilities, and they are able to be more included in "normal life".
Amanda: Yeah, that's a great thing that has developed since grandma's day. [0:04:02.3] Yet, in the basic sense that disability can reduce or eliminate your ability to work, one in four of us will have a time period of one year where we are unable to work due to a disability. So chances are you probably might even know someone between the ages of 20 and 67 years old who is disabled and unable to work a full time job. I know in both Brandon's side of the family and my side of the family we have multiple family members that are in that same situation.
Brandon: And these family members aren't old, actually they're quite young.
Amanda: They're around our age.
Brandon: Yeah, young as in, I mean I feel like I'm young, but like again, I can think of for myself, what if I was that person, I could be disabled right now.
Amanda: Right, they're in their 30's and 40's like you and me.
Brandon: Yeah, and didn't expect it. Another important thing to remember is that disability comes in all kinds of forms. [0:05:01.6] Mostly it develops as a result of a tragic accident. Sometimes it's a mental disability rather than a physical one. That means disability doesn't just impact manual labor jobs, but white collar workers and really about anybody. So let's explore. What happens if you become disabled?
Amanda: Yeah, well we talked about how there are greater protections and inclusions now than in grandma's day, it's still is very hard to be disabled, such that you cannot work. I mean there's the physical and emotional pain that you're likely to experience, there's also probably going to be some social pain too, since you'll probably miss out on social activities, even the social activity of going to work you're missing out on.
Brandon: Yeah, and I have a person that I was working alongside that they were applying for Social Security benefits for disability and it took them a while before they even got the benefits, like a year. [0:06:05.6]
Amanda: That's what we're going to talk about now, is just how hard that...
Brandon: Yeah. And that was before they even got the benefits. So you might qualify for Social Security benefits if you've been paying into the Social Security already, but it does take some time.
Amanda: Right. The Social Security Administration has a pretty strict definition of disability, so it's hard to qualify. It can take time like you're talking about. And then when you do qualify, the benefits aren't that huge. At the beginning of 2019 when we're recording this episode Social Security is currently paying an average monthly disability benefit of about $1234 to all disabled workers. That's barely enough to keep someone with a disability above the 2018 poverty level.
Brandon: The poverty level is $12140, so then above that not very much at all.
Amanda: Right. [0:07:01.3]
Brandon: So not only might a person suffering from a disability be in physical and emotional pain, but they also suffer from social isolation and struggle as well to pay the bills.
Amanda: Yeah, because when you think about it they're going to have higher bills even beyond their normal bills due to ongoing medical care, they're going to have to be paying for the treatment they're receiving for their disability. It's kind of a double whammy.
Brandon: Yeah, and I think also, like not just the disabled person, but the families that are affected by it. It affects all areas, maybe the person that got disabled needs a caretaker or something, I don't know.
Amanda: Right, right, put more people in their lives out of work or have to reduce their hours too. That's why we have things like the Family Medical Leave Act and stuff like that.
Brandon: So being disabled even for a year has to be one of the hardest things in life to go through.
Amanda: When I was looking into this idea of disability I was also coming across some research looking at bankruptcy statistics and they're looking for what the major causes of bankruptcy are, and there's some conflicting numbers, different researchers found different things but it's been pretty clear in all the studies I came across that those who become disabled often end up filing for bankruptcy because of that double whammy I was talking about. [0:08:24.5] They've got increased medical costs and their income goes down. They're hit from both sides. More bills and lower income and that means a lot of pseople who are in that situation then end up filing bankruptcy as well.
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Brandon: So Amanda, what can we do to protect our income and thereby our wealth in case of a disability? I mean what grandma tell us to do?
Amanda: Yeah, so one option is disability insurance, so that if you become disabled the insurance would pay you a monthly benefit that's a portion of your salary. But just like most insurance, you could waste your money. If you're lucky three out of four, you won't have a disability.
Brandon: So let's explore some other options too. I mean we like to hold people as capable here, right?
Amanda: Right, so we're not saying you can't self-insure, disability insurance is something to consider, but let's look at some other options. So we're not calling these other options self-insuring, you can't really do that, we need to have a whole other episode where we address this whole self-insuring idea, which come up before in a previous episode, I'm putting on the list, don't worry. [0:10:07.7] But you're right
Brandon, we should explore some other options.
Brandon: So another is a basic emergency fund, I believe. Right?
Amanda: Right. That's going to be the other option that we look at primarily as the basic emergency fund.
Brandon: How much should you have in an emergency fund?
Amanda: So a famous edutainer says three to six months is what you need. Yet remember we were talking earlier, one in four of us is going to have a disability that keeps us out of work for at least a year. So perhaps it's better to have a year or more of income/expenses saved so that you can account for that time period if that were to happen. Because also who knows if and how much you're going to get from Social Security and disability benefits. If you have that emergency fund there, maybe use some of it, maybe use all of it, but it would be good to have at least a year ready to go. [0:11:02.8]
Brandon: I even have a friend who is not disabled who's been looking for a job, has multiple interviews always lined up all the time reaching out, doing other things, and it's taken him nine months to a year to even get a job, and he is not disabled, so I could only imagine a disabled person would be a lot longer, at least, I mean I would think that so having that emergency fund of at least a year.
Amanda: If you can't work for the year and then you're able to work again, it still might take you some time to find that work is what you're saying. Absolutely.
Brandon: And I'm always asked on this topic of emergency funds, and people always ask, "Should I get out of debt before saving or I want to focus on that first and then I'll save?"
Amanda: Yeah, this is one of the things that definitely comes up over and over again, and something that people don't realize really like about the frustrating thing about paying off your debts before saving for an emergency fund or that kind of thing. [0:12:08.1] So there's two things. The first is that the money that you put towards your debts you can't get back, and really you have nothing to show for it except for a smaller number on a bill that you receive once a month or so. I mean you're saving interest long term when your paying your debts, but you don't really realize that until your debt is fully paid. I mean you're not getting anything back in your pocket, you don't have anything back into your cash flow, and that can be really frustrating. You don't really experience much of a difference in life as you're paying off those debts. And then secondly if you're throwing all that money toward your debts and then something major happens like a disability, you're likely to go further into debt scrambling to cover for that emergency. I mean maybe it's just your tires blow on your car or something not as catastrophic as a disability that can just cause people to start scrambling. [0:13:03.9] So that makes me kind of go to why not save and while you're also paying off debt and finding the right balance there.
Brandon: I could just imagine somebody who is going down the Dave Ramsey approach and they're yelling, "I'm debt free." and then, you know, the next month something happens and they're going backwards instead of forwards. So then should we not get out of debt then, is that we're saying?
Amanda: No, that's not what I'm saying at all. Getting out of debt is good and that as an honorable pursuit to make, but what I'm saying is use some balance. Maybe put 50% of your extra money toward your debt and 50% toward your savings, maybe a different ratio would work better for your particular situation depending on your interest rates and how much you have saved already. And if you need help figuring out this right mix for you, you know everybody is going to have their unique mix. [0:14:01.4]
Brandon: Most people need help, not just if they need. It's good to have somebody there.
Amanda: Yeah, somebody to just talk it through with, that's what we do with people all the time. We just help talk through with it, we don't charge them to help talk through these kinds of things. But before we get into that, I have to ask a very important question. Here it is, a very important question to ask. What if you could do both at the same time? What if you could build up an emergency fund and use it to pay off your debt when and if it makes sense. In other words, what if your money could do two things at once.
Amanda: Right. This is the kind of thing we're exploring and talking through with people all the time and sometimes you need that outside perspective, that guide to help you these things through and explore things that you wouldn't otherwise explore on your own. Again, we don't charge people to explore like this with them. All you have to do is that something that you would find helpful, which we think almost everybody would find helpful, people tell us all the time they found our conversations helpful. [0:15:07.9] All you got to do is just go to GrandmasWealthWisdom.com, click "request a meeting" and schedule a 15 minute call with one of us, you can choose Brandon or me, we both do the same things, ask the same kinds of questions, whoever you feel most comfortable with.
Brandon: So Amanda, let me ask one more tough question, because I keep asking you tough questions.
Amanda: That's fine, okay, I'm bracing myself for this one.
Brandon: Should a young person really prepare for that one in four chance of being disabled? I mean there is a life to live and fun to be had. I mean you only live once, right? Why pay off debt or save for an emergency or buy disability insurance or whatever? I mean many young people have enough demands on their money now. What about those who feel this way, Amanda?
Amanda: Thanks for giving me this tough question, Brandon. I guess what I would ask people who feel this way is a pretty simple question, but maybe it's one that they haven't thought of before. [0:16:09.0] What if you could keep your options open? For example, what if you could save for an emergency and at the same time create money to enjoy more of your life now? What if you could pay off your debt and continue to enjoy life in the moment? Maybe there are some sacrifices, you know, as a cliché goes, you can't have your cake and eat it too,
but what if you could eat a little bit of your cake to satisfy your hunger now and save some for when you're hungry later too? I mean that seems like what grandma would do. She wouldn't gorge herself, she'd eat enough of the cake, and she'd make sure that she has enough of that cake for her future too, including a future that could go crazily array.
Brandon: Or crazily awesome.
Brandon: Never know. But the most important thing to take away from this episode is that you are on the verge of ability. [0:17:02.1] If you put your mind and effort to it, you might just surprise yourself with how much you can improve your current situation so that something like a yearlong disability or any other major setback doesn't totally ruin your financial future and you have the option to take advantage of positive situations that come your way too, where you have the ability to be able to take advantage of that thing. You're capable of more than you think. You might just need a nudge in the right direction. So we'd love to help with that. Just reach out to GrandmasWealthWisdom.com/call to schedule a call with us.
Amanda: In the next episode we're continuing our On The Verge Of series with "On The Verge Of Peace".
Brandon: Just like one of the hippie things?
Amanda: No. We live in a stressful world where so many of us are on the edge of burnout. [0:18:02.2] What I mean by peace is this idea of could it be possible to have a boring financial life with no stress even when the next recession hits? What if you're like, "I'm still bored."? Be sure to subscribe so that you won't miss us as we explore the possibilities.
Brandon: Until next time, keep building your wealth simply and sustainably for your own future and the future of our grandchildren's generation.
The topics presented in this podcast are for general information only and not for the purposes of providing legal, accounting or investment advice. On such matters place consult a professional who knows your specific situation.