How to manage your finances after injury or illness
When you’re ill or injured, you may have to deal with more than physical pain. Financial impacts can be harrowing too, creating emotional turmoil that can set your recovery back further.
We don’t know if—or when—we may be impacted. Unintentional falls are the most common form of injury requiring hospitalisation in Australia, according to the Australian Institute of Health and Welfare, followed by transport accidents.
Yet while we may not have that crystal ball to tell us if/when we may be impacted by illness or injury, we know that, sure as the sun rises in the east and sets in the west, there will still be bills to pay.
How do we then manage finances in the face of injury or illness?
Your greatest asset
One of the first questions I ask my clients is, “What’s your greatest asset?” You are your greatest asset! That’s why having appropriate personal insurances is one of the five pillars to financially standing on your own two feet. Health, income protection, trauma (or ‘critical illness’ cover) and disability insurance all have a role to play in protecting you, and your family, from the financial impacts of injury or illness. If it’s been a while since you’ve reviewed your personal insurances, I encourage you to do so now with a professional financial adviser.
Pays to ask
In terms of injury, there may be compensation (whether work-related or personal). Compensation aside, sometimes we don’t know what we’re entitled to. It actually pays to ask the person who brokered your personal insurances as a first stop. It was only a casual passing comment about how hard it was doing things one-handed that alerted me, for example, to my client Janet’s predicament. She’d hurt herself and while technically, she could still work and go to meetings, driving was an issue: she was paying a fortune for taxis, and then there were the medical expenses. Her situation was not going to pass the income protection test because there were not enough days off to meet the waiting period, however she had ticked a ‘special disability benefit’ on her policy. This enabled her to access a one-off payment of more than $10,000 which helped with bills and support.
You may be entitled to a disability support pension from Centrelink (dependent on the type of injury/illness and your income and investments). If you are being taken care of, your family member may be able to get a carer’s allowance and/or carer’s payments.
Balancing debt and income
Professional advice also is invaluable in helping you best determine how to manage debt and future income.
Medical expenses may be accumulating on the debt side of your ledger. Have you maxed out your credit card or increased your mortgage to help with daily living costs? Perhaps you owe family members or friends.
And what of future health-related costs: will operations be needed as a result of the injury, when and how many; will the home need modifications for wheelchair accessibility: likewise, the car; and will support workers be employed for additional care? Such scrutiny helps when planning how to make ends meet and make investments work for you.
Handling a payout
The biggest mistake people make when receiving a lump sum—whether it is a lottery or personal injury payout or an inheritance—is to go wild and spend it. When the money is gone, it’s gone. In the case of a payout due to injury or illness, look at this sum as reimbursement of lost income, payment for future income and a means of paying for medical expenses already incurred and likely in the future.
If you look after the money well and let it work for you, you can enjoy the money your money is generating, rather than eroding it. Take for example, my own experience with an injury. A few years ago, I was rear-ended by a driver, distracted by his mobile phone. While not seriously injured, I do live with permanent damage to my neck and requires regular chiropractic care. That’s an ongoing medical cost I had no way of foreseeing. I received a small payout for the injury and invested it in a way that grows against inflation so that ongoing medical treatments are covered. That’s smart and it ensured my medical bills for an injury weren’t creating another pain in the neck.
Helen Baker is a licenced Australian financial adviser and author of two books: On Your Own Two Feet – Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce – Your Survive and Thrive Financial Guide. Proceeds from the books’ sales are donated to charities supporting disadvantaged women.
*Note this is general advice only and you should seek advice specific to your circumstances.