Wealth

Easing the financial strain of disability or illness

Being unable to work can turn your world upside down. Easing the financial pressure is an important step to feeling back in control.

Any illness or disability that prevents you from working brings its own challenges but worrying about money can really ramp up the pressure.

You may be entitled to a range of benefits and payments, but there’s also a number of other ways to relieve the financial strain. We’ve put together some strategies for regaining control, including creating a passive income to finding ways to cut costs. 

Make the most of a passive income

Passive income is money you receive without having to physically work for it. When you’re unable to work, it can bring financial freedom – particularly if you don’t have any debt.

“The most common sources of passive income are investments in property, or in shares or managed funds that provide dividends and income distributions,” says Jodie Howes, Senior Financial Adviser at Australian Unity. “In an ideal situation, you’ll have enough income to cover all your essential outgoings with a bit extra for the things you enjoy.”

A professional financial adviser can help you to structure your portfolio to focus on generating passive income. “An adviser will also take your individual needs and preferences into account, such as your tolerance to risk,” says Jodie.

Identify relevant government payments

If a disability is preventing you from working, you may be eligible for payments such as a mobility allowance or a disability-support pension; Centrelink is the best source of advice if you’re looking to understand the relevant benefits and your eligibility.

However, it’s important to note that many government allowances take the value of your assets into account. “Some people find they’re not eligible because they’re what’s known as ‘asset rich, income poor’,” explains Jodie. “A financial adviser can help you structure your investments so you don’t miss out unnecessarily.”

Reduce your non-essential expenses

When your income is reduced, you may need to cut back on your spending.

“Many of us are unaware of our discretionary spending,” says Jodie. “A detailed budget is an important first step.”

She recommends separating essentials like food, rent/mortgage and utilities from discretionary spending – the things we need rather than want.

“When you have it all written down it’s easy to see ways to trim costs.”

The government’s free Moneysmart budget planner can help you to set up a realistic budget and stay on track.

 

Research and compare your service providers

Once you’ve reduced your non-essential costs, you can then look at ways to cut back on essential spending.

“It’s a good idea to compare service providers,” says Jodie. “There are a lot of companies offering different prices and deals on things like energy, phone and the internet. If you haven’t checked for a while you might be surprised by how much you can save.”

It could also pay to review your insurances. “You may find you have levels of cover, or even whole policies, you no longer need,” Jodie explains.

Register for medical subsidies

If you have  large number of medical expenses, you may also be eligible for government subsidies that reduce your costs.

Medicare Safety Nets can help by lowering your out-of-pocket costs for out-of-hospital services such as scans, tests and visits to doctors and specialists, while the Pharmaceutical Benefits Scheme (PBS) Safety Net allows you to save on PBS medication. In both instances, you’ll pay less (or receive higher rebates) once you’ve exceeded a specified threshold of expenses within a year.

Ask for help with your bills or mortgage

Sometimes, being unable to work can leave you struggling in the short term. If you’re finding it difficult to pay your bills or mortgage, contact your bank, utilities companies and other service providers to ask about their financial-hardship options.

“If you have a mortgage, your lender might be prepared to offer temporary relief,” says Jodie. “Contact them as soon as you realise you’ll have trouble keeping up with your repayments and they might be willing to put them on hold for a few months. Alternatively, if you’re paying off both principal and interest, you might be able to switch to interest only for a while.”

Plan for financial emergencies

Even if you can cover your day-to-day expenses, the thought that you might have to deal with an unexpected financial emergency – for example, emergency home repairs – can be stressful. Creating an emergency fund is one way to deal with this but, if you have an investment portfolio, you may also choose to restructure it to increase your liquidity.

If you need fast cash, having all your money tied up in property investments is less than ideal – it can take a while to sell a property and, if you’re in a hurry, you could be forced to accept an unrealistically low price. One option, therefore, is to put your property on the market before you need the money, so you have time to wait for a good price. You can then invest some or all of your proceeds in more liquid assets, such as shares, which can be quickly converted into cash.

Again, a financial adviser can help you weigh up the pros and cons of restructuring your portfolio in this way.

Help when you need it

Worrying about money can make a difficult situation seem even worse. Creating a clear picture of your position and a plan for the future could help to relieve the pressure – and you don’t have to do that alone.

Whether it’s building a budget with a family member or getting professional financial advice, the right help at the right time can make it easier for you to manage your finances, reduce the pressure and assist you to stay comfortably in control. 

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