Simon Says #8: Your Most Valuable Asset

Simon Says #8 - Your Most Valuable Asset

Matt Simon

Hello friend, and welcome back to Simon Says.

If you’d like to read any past issues of Simon Says, you can find them all here.

There’s a saying by Charles R. Swindoll, "Life is 10% what happens to us and 90% how we react to it." I try to avoid being reactive, which requires being proactive and having contingency plans in place. Like Lil Wayne said, “prepared for the worst but still praying for the best.”

Imagine waking up one morning, ready to tackle another day of life. You've always believed in the power of a positive mindset, and you've worked hard to build your career, support your family, and serve your community. But then out of nowhere, you're dealt a bad hand - an injury or illness that takes you out of the game. All of a sudden your finances are uncertain and your future is a gamble. It's a scary thought, but it's a reality for over 50 million people ⁽¹⁾ in the US alone.

That's where disability insurance comes in - it's the ace up your sleeve that protects your income, no matter what cards life deals you.

3 takeaways you’ll get from today’s piece:

Debunking misconceptions about disability.
Understanding the significance of your ability to work.
The consequences of not having insurance to replace your income.

Common misconceptions:

#1 - “It’s not going to happen to me.”

Unfortunately disability affects someone new every 2 seconds, which means over 200 people will become disabled in the time it takes you to read this piece. According to the Council for Disability Awareness⁽²⁾, more than one in four of today’s 20-year-olds will become disabled before reaching retirement age. This dangerous mindset of 'it can't happen to me-ism' will leave you unprepared and vulnerable.

#2 - “Disability only happens from catastrophic accidents.”

This one’s far from the truth as injuries are only responsible for 12% of long-term disabilities, barely more than the 10% caused by mental health issues. According to the same source⁽³⁾, the majority of disabilities stem from illnesses like cancer, heart attack, or diabetes. Musculoskeletal disorders, such as arthritis, back pain, and spine/joint disorders, are the leading cause of disability.

#3 - “My job will cover me.” … “The government will help me.”

Both are unlikely. Workers’ Compensation only covers you if the illness or injury was directly work-related, and well over 90% of disabling incidents are not work-related.

A common theme I often share with friends, family, clients, and in this newsletter, is to not rely on the government. From 2009 to 2018, only 32 percent of Social Security Disability Insurance (SSDI) claimants had their applications approved. According to the Social Security Administration itself, “at the beginning of 2019, Social Security paid an average monthly benefit of about $1,234 to all disabled workers. That is barely enough to keep a beneficiary above the 2018 poverty level ($12,140 annually).” ⁽⁴⁾

NJ is one of just a few states with a program to offer disability benefits, but like everything with government, good luck getting through the process in a speedy manner. Also, like social security, the benefit most likely won't be enough to cover all your expenses. Be aware that 1099 workers are not eligible for this state benefit, and those who work for the state or local government may be able to take their pension early or receive other benefits in the case of becoming disabled.

The ability to work:

Your ability to work is not just about earning a paycheck; it's the foundation of your physical, mental, and of course your financial well-being. On a recent Andrew Huberman podcast, the topic centered around a study which supports the idea that having purpose in life and feeling useful to others actually increases your lifespan. (Maybe that’s why our political class is so old - it’s certainly not good genes).

Experiencing illness or injury that prevents you from working can cause significant emotional and mental stress. However, having a way to replace your income can provide you with the financial security you need to continue supporting your family's lifestyle and keep your business running. By having this reliable source of income, you can maintain your sense of purpose and independence, without becoming a burden on those around you.

Impact on you:

First you may have to drain your personal finances, maybe take equity out of your house or possibly run up credit card debt. There’s a chance you may also struggle to run your business and may have to figure out an exit plan. After that, the next step could be where you become financially dependent on relatives, or friends, or the kindness of random strangers online, or the government. A 2019 study of consumer bankruptcy filings found that nearly 80% of debtors cited income loss as a contributor to their bankruptcy. ⁽⁵⁾

You have auto insurance to protect your car from an accident, you set money aside in an emergency fund to cover random expenses that may come up, and you understand the importance of life insurance being able to protect your family when you’re no longer around. But are you prepared for the risk of being unable to work?

Being that adults with disabilities are more likely to be obese, smoke, and have diabetes⁽⁶⁾, you should always strive to live a healthy lifestyle and take care of your body. Mitigating the risk of illness or injury is super important, but all life’s risks cannot be mitigated to zero. If you run a business, make sure you’re training your employees to do your job so that the business can continue making money with or without you.

While risk-mitigating techniques are helpful, the best protection for you, your family, and your business is to be financially prepared with a disability insurance policy. These policies can often be confusing with all the different riders and specificities to it, so make sure you work with a professional. If you have any questions about disability insurance or your own policy, feel free to book a call with me using the link below.

Book a Call